REG - Longboat Energy PLC - Norwegian JV Transaction with JAPEX completed

Longboat EnergyAnnouncement

17/07/2023 07:00

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RNS Number : 1468G  Longboat Energy PLC  17 July 2023

17 July 2023

 

 

 
Longboat Energy
plc

("Longboat Energy", the "Company" or "Longboat")

 

Transaction to create Norwegian Joint Venture with JAPEX completed

 

Longboat Energy, the full-cycle E&P company, is pleased to confirm that
its transaction with Japan Petroleum Exploration Co., Ltd ("JAPEX") to
establish a joint venture in Norway has now been completed with the initial
investment of US$16 million received by the renamed entity Longboat JAPEX
Norge AS ("Longboat JAPEX" or the "JV"). As part of the transaction, Longboat
JAPEX will use part of the JAPEX investment to repay an intercompany loan of
NOK 45.5 million (approximately £3.5 million) to Longboat Energy.

 

The contingent consideration of US$4 million, payable by JAPEX into the JV,
associated with the recently announced production acquisition, will be paid on
completion of that transaction which is anticipated toward the end of the
year.

 

The third tranche (the "Velocette Tranche") of up to US$30 million is
contingent on a successful discovery on the Velocette well, which is expected
to spud in September. The amount payable under the Velocette Tranche is based
on a sliding scale applied to the gross resources approved for development by
the Norwegian Ministry of Petroleum and Energy.

 

Having completed the transaction, the US$100 million Acquisition Financing
Facility to finance acquisitions and associated development costs has been
established and is available for drawing by the JV.

 

Longboat JAPEX is owned 50.1% by Longboat and 49.9% by JAPEX.

Helge Hammer, Chief Executive of Longboat, commented:

"We are pleased that the creation of the Longboat JAPEX joint venture has
completed as scheduled and now look forward to pursuing further acquisitions
and opportunities on the Norwegian Continental Shelf to follow on from the
first joint transaction announced at the beginning of this month.

 

"In the near term, we are looking forward to the drilling of the high impact
Velocette exploration well (JV 20%) which is expected to spud in September."

 

 Enquiries:
 Longboat Energy                                                  via FTI
 Helge Hammer, Chief Executive Officer
 Jon Cooper, Chief Financial Officer

 Stifel (Nomad & Joint Broker)                                    Tel: +44 20 7710 7600
 Callum Stewart

 Jason Grossman

 Ashton Clanfield

 Cenkos Securities plc (Joint Broker)                             Tel: +44 20 7397 8900

 Neil McDonald

 Pete Lynch

 Leif Powis

 

 FTI Consulting (PR adviser)  Tel: +44 20 3727 1000
 Ben Brewerton                longboatenergy@fticonsulting.com (mailto:longboatenergy@fticonsulting.com)

 Rosie Corbett

 Catrin Trudgill

 

The information contained within this announcement is not considered to be
inside information prior to its release.

 

Background

 

Longboat Energy was established at the end of 2019 to create a full-cycle
E&P company through value accretive M&A and near-field exploration.
Since June 2021, Longboat has entered a series of four transactions to acquire
interests in a portfolio of nine gas-weighted exploration wells drilling on
the Norwegian Continental Shelf close to existing infrastructure. To date,
eight of these wells have been drilled resulting in five hydrocarbon
discoveries, representing a technical 63% success rate.

 

In February 2023, Longboat entered Malaysia through the award of a Production
Sharing Contract for Block 2A, offshore Sarawak. Block 2A covers approx.
12,000km(2) and is located in water depths of between 100-1,400 metres where a
number of large prospects across multiple plays have been identified, with
significant volume potential representing multiple trillions of cubic feet of
gas.

 

In May 2023, the Company announced that an agreement had been reached with
Japan Petroleum Exploration Co., Ltd ("JAPEX") to make a significant
investment into its Norwegian subsidiary, Longboat Energy Norge AS ("Longboat
Norge"), to form a joint venture.  Under this agreement, JAPEX will make a
cash investment of up to US$50 million for 49.9% of Longboat Norge and provide
the JV with a US$100 million Acquisition Financing Facility to finance
acquisitions and associated development costs.

 

In July 2023 the Company announced the acquisition of its first producing
interests in the Statfjord Øst Unit and Sygna Unit located on the Norwegian
Continental Shelf

 

Longboat's activities remain focused on creating a portfolio with a clear
low-cost route to monetisation and low-carbon drilling and development
opportunities, well aligned to Longboat's ESG targets which include a
corporate 'Net Zero' on a Scope 1 and 2 basis by 2050.

 

Related Party Transactions

Acquisition Bridge Facility: As announced on 2 May 2023, JAPEX has provided
Longboat JAPEX with a five-year, US$100 million Acquisition Financing Facility
(the "Facility") to finance acquisitions and associated development costs. The
Facility is available for drawing for the first three years subject to certain
conditions, including mutually agreed acquisitions by the Joint Venture. The
Facility will attract a market-rate of interest on an increasing scale over
its tenor with an initial rate of 6% in the first year, rising to 13% in year
five, resulting in an all-in cost over the term of less than 10%.  Whilst no
amounts have been drawn on the Facility to-date, by the nature of JAPEX being
a related party to the Company following completion of the JAPEX transaction,
future drawings and payments under the Facility will constitute related party
transactions under AIM Rule 13. The Company's directors consider, having
consulted with Stifel, the Company's Nominated Adviser, that the terms of
Facility are fair and reasonable insofar as shareholders are concerned.

Secondment Agreement: Under the terms of the Investment Agreement between the
Company and JAPEX dated 28 April 2023, at completion Longboat JAPEX shall
enter into a Secondment Agreement with JAPEX which entitles JAPEX to second
employees to Longboat JAPEX (the "Secondment Agreement").  Under the terms of
the Secondment Agreement, Longboat JAPEX will pay JAPEX a secondment fee and
meet the living and other expenses of the seconded employees in Norway
together with any associated payroll taxes which is expected to be circa £0.3
million for the remainder of 2023 and approximately £0.8 million in future
full year periods. This may increase by circa 20% in 2024, up to £1.0
million, as a result of JAPEX increasing the number of seconded employees to
the maximum allowed under the Secondment Agreement. The payments to JAPEX from
Longboat JAPEX Norge AS under the Secondment Agreement are expected to
classify as related party transactions under AIM Rule 13. The Company's
directors consider, having consulted with Stifel, the Company's Nominated
Adviser, that the terms of the Secondment Agreement are fair and reasonable
insofar as shareholders are concerned.

 

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