REG - LMS Capital PLC - Investment in Dacian

LMS CapitalAnnouncement

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RNS Number : 7326U  LMS Capital PLC  11 August 2025

11 August 2025

LMS CAPITAL PLC

 

Investment in Dacian

 

The Board of LMS Capital plc ("LMS" or the "Company") announces that it has
agreed to make an additional investment in Dacian, the Romanian onshore oil
and gas production company in which it invested in 2020.

 

At the General Meeting of the Company on 14 May 2025, shareholders voted in
favour of  recommended proposals for a managed realisation ("Managed
Realisation") outlined in a circular (the "Circular") sent to shareholders on
24 April 2025.

 

In the Circular, the Board noted that approximately £2.5 million to £3.5
million had been identified as potential additional funding by LMS for Dacian.
Any additional investment support would only be made on the basis of a solid
business case from the new team and a clear path to preserving and/or
enhancing prospects for realising value within a reasonable timeframe for LMS
shareholders.

 

The Board has worked closely with the new team at Dacian and determined that
it should now make an additional investment.

 

Background

 

Dacian has not met its internal production targets over recent months and the
oil price environment has softened, negatively impacting its cashflows.

 

As announced at the time of the General Meeting in May, changes have been
implemented at Dacian this year:

 

 -  John Burkhart, an experienced industry executive was appointed as a
    Non-Executive Director of the Dacian board earlier this year;
 -  The executive team at Dacian has been restructured under new leadership; and
 -  In addition, since May, Blaine Saathoff, an operational executive in the
    industry with experience in Eastern Europe has joined the team for 50% of his
    time. He will support the new leadership team on all aspects of operations and
    will join the Dacian board shortly.

 

Dacian's new team has developed a detailed plan for the next 12 months of
which the key elements are:

 

 -  Investment in inventory of replacement components and implementation of a
    maintenance plan to reduce the frequency of equipment failures and consequent
    interruptions to production;
 -  Carrying out a programme of well workovers and interventions, financially
    evaluated and risk adjusted in accordance with industry best practice, to
    enhance production over the next 12 months;
 -  Taking opportunities to monetise some unutilised land and equipment held by
    Dacian;
 -  Implementation of cost efficiency measures;
 -  Evaluating and presenting to external capital, an identified set of additional
    development projects within Dacian's existing fields; and
 -  Continuing to work with partners in the development of other opportunities
    including in clean energy initiatives.

 

Additional Investment

 

The plan requires an estimated US$5.3 million (£3.9 million) of additional
investment to fund the capital costs and to provide working capital for
inventory and other payments. The LMS Board has resolved to provide this
additional capital.

 

In the Board's view, the expected returns resulting from the additional
investment will be attractive and would offer the Company the prospect of a
materially better overall financial outcome on realisation than seeking an
immediate sale. The Board acknowledges the risks inherent in the oil and gas
industry and Dacian's past track record. However, in reaching the decision to
invest further, the Board has taken account of the analysis and challenge
process which has been gone through over three months with the external
consulting team, the transparency and speed of execution of financial and
governance matters under the new leadership and the preliminary feedback on
market opportunities to realise the value in the oil and gas business which
the plans are designed to unlock. In addition, the Board continues to see
potential value in the opportunities in clean energy which the company is
continuing to progress.

 

Structure

 

As previously reported, between July 2024 and May 2025, US$2.25 million was
provided by way of loan to Dacian (the "Bridge") from investors, including two
of the Company's directors. The Bridge was due to mature on 30 June 2025, but
the lenders agreed to extend the term. The Bridge is entitled to a 14% annual
return (non-compounding) and the Bridge lenders will receive in aggregate
87,063 shares in Dacian issued at a nominal value and representing 23.7% of
the company's enlarged capital. These shares will replace the options to
subscribe for shares under the previous July 2024 Bridge loan agreement.

 

LMS has now agreed (subject to documentation being finalised) to provide
US$5.3 million (£3.9 million) to Dacian by way of a new loan (the "New
Loan"). The New Loan will be entitled to a total annual return of 14.25%
(non-compounding) and LMS will be issued with 204,533 Dacian shares at nominal
value and representing 55.8% of the company's enlarged share capital. The New
Loan has a maturity date of 11 months from signing (with an option for the
lender to extend).

 

The issue of shares in Dacian to the Bridge lenders and under the New Loan to
LMS, will be implemented in Romanian law once regulatory approval for the June
2024 reorganisation is received. This is still awaited but Dacian is advised
that the necessary approval should be received, and such delays are not
unusual.

 

The overall effect for LMS, once the approval for the issue of new Dacian
shares in the June 2024 reorganisation is received and the New Loan and
related issue of new Dacian shares is put in place is that LMS will have its
US$5.3 million loan plus 14.25% per annum non compounding return, and own
67.4% of the issued share capital of Dacian.

 

All investors have the opportunity to participate in the New Loan. No related
parties will invest in the New Loan. Based on current discussions with
investors, it is anticipated that between US$200,000 and US$300,000 of
additional investment might be advanced by non-related party investors.

 

Net Asset Value

 

The previously reported underlying net asset value of Dacian at 31 March 2025
of US$11.6 million investment has been reduced by US$2.3 million, reflecting
the impact of the additional financing on the prior investment value.

 

 

For further information please contact:

 

 LMS Capital plc                                        020 7935 3555

 Nick Friedlos, Managing Director

 Shore Capital, Broker                                  020 7408 4050
 Gillian Martin, Daphne Zhang, Sophie Collins

 

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