REG - Reabold Resources - Posting of Circular and Notice of Requisitioned GM

Reabold ResourcesAnnouncement

31/10/2022 07:01

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RNS Number : 5707E  Reabold Resources PLC  31 October 2022

31 October 2022

Reabold Resources plc

 

("Reabold" or the "Company")

 

Posting of Circular and Notice of Requisitioned General Meeting

 

As announced on 17 October 2022, Reabold received a requisition letter (the
"Requisition Letter") from Pershing Nominees Limited, which owns approximately
6.93% of the Company's issued share capital on behalf of five beneficial
shareholders, requesting the Board to convene a general meeting under section
303 of the Companies Act 2006 to consider resolutions which, taken together,
remove the entire current board of directors and replace them with four new
directors of their own choosing.

 

Accordingly, the Company is today posting a circular to Shareholders (the
"Circular") in response to the Requisition Letter and a Notice of General
Meeting (the "Notice") convening the requisitioned General Meeting for
Shareholders which is to be held at 8th Floor, The Broadgate Tower, 20
Primrose Street, London EC2A 2EW at 10.00 a.m. on 16 November 2022.

 

The Board Unanimously Recommends Shareholders VOTE AGAINST ALL Resolutions
for, inter alia, the following reasons:

1.   The Requisitioning Shareholders are opportunistically trying to gain
control of Reabold, its operational asset base and its cash without paying a
control premium.

 

2.   The Board believes that the Requisitioning Shareholders interests are
not aligned with the Company or its wider Shareholders. They are acting in a
self-serving manner.

 

3.   The Requisitioning Shareholders are seeking to replace the Board in its
entirety without outlining any form of alternative strategy to ensure value
for Shareholders.

 

4.   Reabold has delivered on its investment strategy to date and has a plan
to maximise value for all shareholders in the future. The Company intends to
make a distribution to Shareholders of £4 million and planned replication of
Corallian success to enable future distributions.

 

5.   The track record of two of the Proposed Directors includes examples of
significant value destruction at listed resource companies where they acted as
directors. The other two Proposed Directors have no public company director
experience that we are aware of.

 

6.   Should the Requisitioning Shareholders be successful in removing the
currently QCA Code compliant board structure, the corporate governance of
Reabold could be jeopardised.

 

7.   The Requisition has caused serious and extremely unwelcomed disruption
and expense to the Board, the Company and its Shareholders.

 

 

A statement from the Board of Reabold:

 

"It is the Board's view that the requisitioned general meeting is an
opportunistic attempt to seize control of the Company and its assets without
paying a control premium to all shareholders, particularly as the requisition
to replace the Board was received less than two weeks following the agreed
terms of sale of Corallian to Shell for which Reabold will receive £12.7
million. The Company believes that a portion of the £12.7 million cash
receivable by the Company from the sale of Corallian should be returned to
Shareholders and we are today stating our intent to distribute £4 million to
Shareholders upon receipt of the second tranche of funds from Shell. The
mechanism of this distribution will be determined following due consultation
with our Shareholders.

 

Of significant concern to the Company is the fact that the neither the
Requisitioning Shareholders nor the Proposed Directors have outlined a
strategy for Reabold. The current management team, with the oversight of the
board, has created Reabold's portfolio since joining the Board in 2017, and
the Proposed Directors have not articulated how they would create value for
Shareholders.

 

We continue to develop our portfolio of assets, and over the next twelve
months we expect to see the results from the Pensacola well, the results of
which will be key for the adjacent licence that we are acquiring, the farming
out of our Reabold North Sea portfolio, and the drilling of the first
horizontal well at West Newton. The current management team has significant
knowledge of these assets and how best to extract value from them. Replacing
the Board of Reabold with Proposed Directors that do not possess the same
level of experience and understanding could significantly derail the
development of these assets at a crucial time for the Company and its
shareholders."

 

Extracts from the Circular are available below. A copy of the Circular and
Notice will shortly be made available to view at www.reabold.com
(https://reabold.com/)

 

Capitalised terms used herein but not otherwise defined shall have the same
meaning given to them in the Circular being posted to shareholders today.

 

For further information, contact:

 

 Reabold Resources plc                                      c/o Camarco

 Sachin Oza                                                 +44 (0) 20 3757 4980

 Stephen Williams

 Strand Hanson Limited - Nominated & Financial Adviser      +44 (0) 20 7409 3494

 James Spinney

 James Dance

 Rob Patrick

 Stifel Nicolaus Europe Limited - Joint Broker              +44 (0) 20 7710 7600

 Callum Stewart

 Simon Mensley

 Ashton Clanfield

 Panmure Gordon - Joint Broker                              +44 (0) 207 886 2733

 Hugh Rich

 Camarco                                                    +44 (0) 20 3757 4980

 Billy Clegg

 Rebecca Waterworth

 

 

 

LETTER FROM THE CHAIRMAN

 

 

REABOLD RESOURCES PLC

 

 Directors:                  Registered Office:

 Jeremy Samuel Edelman       The Broadgate Tower

 Michael Craig Felton        8th Floor

 Marcos Estanislao Mozetic   20 Primrose Street

 Sachin Sharad Oza           London

 Anthony John Samaha         EC2A 2EW

 Stephen Anthony Williams

31 October 2022

 

Dear Shareholder,

 

NOTICE OF REQUISITIONED GENERAL MEETING

 

The Board considers the resolutions proposed by Pershing Nominees Limited, on
behalf of the Requisitioning Shareholders, to be an opportunistic attempt to
gain control of YOUR company without paying a control premium

 

The Board recommends Shareholders VOTE AGAINST ALL the Resolutions at the
General Meeting

 

1.   Introduction

 

As announced by the Company on 20 October 2022, Reabold received a requisition
letter (the "Requisition Letter") from Pershing Nominees Limited ("Pershing"),
on behalf of Stephen Pycroft, Napsbury Holdings Ltd, Raglan Road Capital
Limited, B Kerr & Keltbray Ltd and K Lagan/M Lagan & Furbs (the
"Requisitioning Shareholders"), pursuant to section 303 of the Companies Act,
requesting the Board to convene a general meeting of Shareholders.

 

The Resolutions to be put to Shareholders at the General Meeting comprise the
removal of all six of the existing Directors of the Company, the removal of
any director appointed to the Company subsequent to the date of the
Requisition Letter, and the appointment of four new directors proposed by the
Requisitioning Shareholders.

 

The Board believes that the Requisitioning Shareholders are seeking to gain
control of your Company without paying a control premium or providing any
detail on its strategy for Reabold. The Board also believes that the Proposed
Directors are not appropriate for the Company and include individuals with a
track record of value destruction as public company board directors in some
instances, or no public board experience that we are aware of.

 

The purpose of this letter is to provide Shareholders with details of the
Resolutions, and explain why the Board strongly believes that these
Resolutions are not in the best interests of the Company. The Board
unanimously recommends that you VOTE AGAINST ALL the Resolutions.

 

 

PLEASE DO NOT ABSTAIN FROM VOTING - YOUR VOTE IS NEEDED

 

A statement from the Board of Reabold:

"The Board has provided the oversight of and support to the current management
team which, it believes, over the last five years, has created a portfolio of
exciting high impact strategically valuable upstream oil and gas assets,
essentially from scratch, during a turbulent time for the sector. The team is
now harvesting value from the portfolio while concurrently strengthening it,
leaving the Company very well positioned, particularly given the critical need
for security of supply of energy in Europe. This valuable portfolio, and the
strong position of the Company means that, in the Board's view, the
Requisitioning Shareholders are opportunistically seeking to gain control of
Reabold, its operational asset base and its cash without paying a control
premium to Shareholders. The Board believes that the Requisition has
deliberately been timed so that the Requisitioning Shareholders through the
Proposed Directors can be in control of the Company at the time of the cash
receipts from the sale of Corallian to Shell, should the Resolutions be duly
passed.

 

"It is our belief that a portion of the £12.7 million cash receivable by the
Company from the sale of Corallian should be returned to Shareholders and we
are today stating our intention to distribute £4 million to Shareholders upon
receipt of the second tranche of funds from Shell. The mechanism of this
distribution will be determined following due consultation with our
Shareholders.

 

"In the Board's experience, the Proposed Directors, Kamran Sattar and Cathal
Friel, have conflicts of interest that are incompatible with being a director
of your company. Specifically, Kamran Sattar previously approached Corallian
attempting to acquire Corallian's non-Victory licences for £500,000 after
Corallian had agreed to sell these assets to Reabold for £250,000. This would
have deprived Reabold shareholders of the value we expect to create from these
assets. Furthermore, Kamran Sattar, and Cathal Friel (through Raglan Road
Capital Limited), have used their ownership of convertible loan notes in
Corallian to attempt to enforce legal claims that the Board believes
jeopardised the sale of Corallian to Shell and, in doing so, potentially also
damaging Reabold's reputation as a credible counterparty.

 

"We highlight that two of the Proposed Directors have a track record of
significant value destruction as public natural resource company directors and
that the other two Proposed Directors have no public company director
experience at all that we are aware of. Of particular concern to the Board, is
that the Proposed Directors have not set out any form of strategy to run the
Company or outlined how they plan to create value for Shareholders. The Board
is concerned that the Proposed Directors may attempt to act in a way for the
benefit of the Requisitioning Shareholders given their significant conflicts
of interest.

 

"Prior to the appointment of the current management team, Reabold had no
significant assets. Over the course of the last five years, the Board believes
that this management team has built up a highly attractive portfolio of oil
and gas assets, has demonstrated its ability to monetise these at the right
time and is positioned to deliver significant value to Shareholders in the
future - your current Board is best positioned to deliver this."

 

The Board Recommends that Shareholders VOTE AGAINST ALL Resolutions at the
General Meeting

 

The Board believes that the Resolutions being proposed at the General Meeting
to be held at 10.00 a.m. on 17 November 2022 at 8(th) Floor, The Broadgate
Tower, 20 Primrose Street, London, EC2A 2EW requisitioned by Pershing on
behalf of the Requisitioning Shareholders are NOT in the best interests of
the Company and Shareholders as a whole and unanimously recommends that you
VOTE AGAINST ALL of the Resolutions at the General Meeting.

 

2.   Reasons why the Board recommends you VOTE AGAINST ALL the Resolutions

 

a.   The Requisitioning Shareholders are opportunistically seeking to gain
control of Reabold, its operational asset base and its cash without paying a
control premium to Shareholders

 

In line with its duties, the Board would consider any reasonable bona fide
offer for the Company by the Requisitioning Shareholders, but the Board will
not cede control of the Company without ALL Shareholders being paid an
appropriate control premium. The Board believes that the timing of this action
is opportunistically linked to the £12.7m cash which is due from the sale of
the Company's Corallian assets to Shell.

 

b.   Certain of the Proposed Directors are not aligned with the Company or
its Shareholders and we believe are acting in a self-serving and conflicting
manner

 

On 5 October 2022, the Company announced the successful sale of Corallian to
Shell for £32m gross proceeds. As part of the sale of Corallian to Shell,
Reabold acquired six attractive appraisal licences from Corallian (the "North
Sea Assets"), excluding the Victory asset, for £250,000. The Board believes
that the Requisitioning Shareholders wanted control of the North Sea Assets.
After Reabold announced its acquisition of the North Sea Assets on 4 May 2022,
Kamran Sattar, one of the Proposed Directors, sought to circumvent Reabold's
acquisition of the North Sea Assets by offering Corallian £500,000 for these
same assets. It is the Board's view that ALL Shareholders should benefit from
the value of these assets not just the Requisitioning Shareholders and the
Board fears that, if the Requisitioning Shareholders gained control of the
Company, the Proposed Directors may continue to behave in a way that benefits
their own position to the detriment of the Company and the Shareholders. Such
action, in turn, may lead to serious corporate governance deficiencies, which
could ultimately jeopardise the Company's suitability for admission to trading
on AIM.

 

Finally, Kamran Sattar, and Cathal Friel (through Raglan Road Capital
Limited), each of whom is a Proposed Director, have used their ownership of
convertible loan notes in Corallian to attempt a legal challenge that the
Board believes jeopardised the sale of Corallian. Specifically, their claim
implied that the conversion price of the Corallian convertible loan should be
£1.50 rather than £3.20 (plus accrued interest) per Corallian share. This
claim could have resulted in the sale of Corallian to Shell not proceeding and
therefore the Company and the Shareholders not realising the benefits of the
successful monetisation of Reabold's interest in Corallian.

 

The Board believes that the relationship established by the existing Board
with Shell will be beneficial to the Company in the medium to long term, and
believes the convertible loan note challenge by Kamran Sattar, if successful,
would have undermined Reabold's reputation as a trustworthy and credible
counterparty in future transactions. If the Proposed Directors' actions
described above were successful it would have prevented Reabold from selling
Corallian to Shell and would have left Reabold unfunded for drilling at West
Newton next year, and of course unable to make the intended distribution to
Shareholders.

 

c.   The Requisitioning Shareholders have not set out a strategy for the
Company

 

The Board notes with alarm that the Requisitioning Shareholders are seeking to
replace the Board in its entirety without outlining an alternative strategy
for the Company to Shareholders. The Requisitioning Shareholders and the
Proposed Directors do not have access to significant non-public technical data
on Reabold's assets and have not identified how they plan to run the assets to
ensure value generation is achieved for Shareholders.

 

d.   Despite the criticism from the Proposed Directors, the Company has
delivered on its investment strategy and has achieved a number of value
enhancing deals since 2017. Reabold has a strict investment criteria which has
enabled the Reabold management team and Board to build, in its view, a
meaningful and growing portfolio of near-term, high growth energy projects

 

Reabold's strategy has been to identify low technical risk projects, which can
be progressed with a relatively modest amount of capital such that the Company
can take the asset to the point of monetisation/value realisation. Reabold can
use the proceeds generated from monetisation to reinvest in progressing and
growing the portfolio as well as providing a distribution to Shareholders.

 

Corallian was recently sold for £32m (which was significantly above book
value), with £12.7m net to Reabold, and Reabold acquiring Corallian's
remaining six licences for a total consideration of £250,000, whilst it
invested only £7.5 million (net) across the entire Corallian portfolio. The
sale is proof of the business model and strategy, achieving monetisation of
investments giving the Company financial flexibility to make a distribution to
Shareholders and progress the strategy from a re-capitalised footing, which is
now being disrupted by the Requisition.

 

The Company has also built a 56% economic ownership of its West Newton asset
which has the potential to be one of the largest UK conventional onshore oil
and gas discovery with gross 2C unrisked recoverable resource of 197.6 bcf of
sales gas.  The Company has built a 42% stake in Daybreak California and a
50.8% stake in Danube Petroleum in Romania. The Company established Reabold
North Sea which has a number of prospective licenses in the North Sea and a
farmout process is underway for these licences.

 

The Company is also acquiring the P2332 licence where it will be partnered
with Shell (operator) and, we believe, is set to benefit from the soon to be
drilled Pensacola prospect on the adjacent licence, also operated by Shell.

 

Historically the Company has been active in respect of drilling its portfolio.

 

In addition, the Company has undertaken a number of corporate transactions to
facilitate monetisation of assets, including the sale of Corallian to Shell
and the completion of the merger between Reabold California and Daybreak,
exchanging Reabold's California position for shares in Daybreak.

 

Finally, the Company has stated its intention to distribute £4 million to
Shareholders upon receipt of the second tranche of funds from Shell, the
mechanism of which is to be determined upon consultation with Shareholders.
The Board's strategy is to replicate its success with Victory and make
considerable further distributions from future monetisation events.

 

e.   Two of the Proposed Directors have a track record of significant value
destruction at public natural resource companies as directors, and the
remaining two Proposed Directors have no public company director experience at
all that the Board is aware of

 

John McGoldrick was Chairman of Caza Oil & Gas from 2007 to December 2015
and over his tenure the share price fell 99.4%. before the company delisted
and became a private entity in May 2016.

 

Given that Cathal Friel was not a director at Cove Energy plc, Touchstone
Exploration Inc. and Rockrose Energy Limited, the Directors believe that the
success of these companies does not enhance his suitability as a proposed
director for Reabold. Cathal Friel was however executive chairman of Fastnet
Oil & Gas from 2012 to 2016, over which time it saw a 74.1% fall in share
price, before transitioning from an oil and gas company to become a
biotechnology company. Furthermore, following Cathal Friel's appointment as
executive chairman of Fastnet Oil & Gas the share price decreased by 90.4%
from its peak to the date of his resignation.

 

We also note that the Board has been unable to find any UK public company
director experience for Kamran Sattar or Francesca Yardley.

 

f.    Kamran Sattar personally, and Portillion, the company in which he is
a director and chief executive, have failed in their obligation to make
relevant regulatory filings to the U.S. SEC in relation to their ownership in
Daybreak based on publicly available information

 

Section 13(d) of the U.S. Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires any person who acquires direct or indirect
beneficial ownership of more than 5% of an outstanding class of an equity
security of a reporting company, such as Daybreak to file a report containing
certain information with the SEC within ten calendar days of becoming the
beneficial owner of such security.  The failure to file such a report is a
violation of Section 13(d) of the Exchange Act.  Under Section 21 of the
Exchange Act, the SEC can seek injunctions or cease and desist orders against
beneficial owners enjoining them from any future violations of Section 13(d)
or money penalties. Daybreak's proxy statement filed with the SEC on July 1,
2022 reports, under the section titled "Security Ownership of Certain
Beneficial Owners and Management", a 33% beneficial ownership in the common
stock of Daybreak attributed to Portillion and a 7% beneficial ownership in
the common stock of Daybreak attributed to Kamran Sattar, in his individual
capacity. Based on publicly available information as at the Last Practicable
Date, neither Portillion nor Kamran Sattar had complied with its or his
obligation to file the necessary beneficial ownership report with the SEC.
Such potential violations of a Proposed Director are highly incompatible with
the highest levels of corporate governance you should expect from your Board.

g.   Should the Requisitioning Shareholders be successful in removing the
entire existing Board, which is currently compliant with the QCA Code's
guidelines, the corporate governance of Reabold would be jeopardised

 

The existing Board comprises two executive directors and four non-executive
directors, two of which are considered to be independent, which provides the
Company with a balanced board, a strong level of independence and appropriate
executive function, which is supported by a non-board Chief Financial Officer.
Indeed, the Board is committed to achieving high levels of corporate
governance as set out in detail in its annual corporate governance statement
which is available on the Company's website.

 

Should all the Resolutions be duly passed, the Board expects that Reabold's
standards of corporate governance would be hampered. It is noted that the
Requisition Letter did not advise whether each of the Proposed Directors would
assume an executive or non-executive directorship role at the Company.
Accordingly, it cannot be assessed how the proposed Resolutions would affect
the Board's structure, efficacy and compliance with the QCA Code.

 

AIM-quoted companies are required to either comply with a recognised corporate
governance code or explain why they are not fully complying. The Company
currently complies with the QCA Code's 10 principles.

 

The QCA Code assigns great responsibilities to the board of directors. The QCA
Code contains a list of requirements, these include that a board should have a
clear view on a company's purpose and strategy, that a board understand the
needs of its stakeholders, that a board identify risks facing the company, and
that a board be comprised of at least two independent non-executive directors.
The Company's governance structure could be harmed if the proposed Resolutions
were passed, and we do not believe that this is in the best interest of the
Company or its Shareholders. Furthermore, pursuant to the AIM Rules for
Companies, the Company's nominated adviser continually assesses the
suitability of the Board and, should it consider the Board to be unsuitable
for an AIM-quoted company, it may be forced to consider its position as
nominated adviser to the Company, thereby jeopardising the Company's admission
to trading on AIM.

 

It should also be noted that a significant conflict of interest would arise
should Kamran Sattar be appointed to the Board as he represents the other
major shareholder in Daybreak where his investment company, Portillion and
Kamran Sattar personally, have a 40% holding. As a result, he may be
conflicted and could potentially have competing interests to those of the
Shareholders.  The Board considers this unacceptable.

 

It is not clear to the Board whether any of the Proposed Directors would be
deemed to be independent directors. Mr Sattar and Mr Friel's independence
status is in question as both have aforementioned conflicts of interest. The
relationship the Requisitioning Shareholders have with Ms Yardley and Mr
McGoldrick is not clear and it is possible that, if each of the nominees are
elected, the Board could have insufficient independence and thus breach the
QCA Code.

 

The Board questions the Requisitioning Shareholders' intention for the Company
going forward given that no strategy has been made available. Given this and
the Requisitioning Shareholders' previous actions, including seeking to
acquire certain of Reabold's assets, the Board is concerned that the
Requisitioning Shareholders would circumvent sound corporate governance
practices and act in a manner that maximises value for themselves rather than
for the benefit of ALL Shareholders. Whereas, the current Board has pursued
its publicly disclosed strategy and achieved a recent monetisation of its
interest in Corallian, of which ALL Shareholders will receive a portion.

 

h.   The requisition has caused serious, time-consuming disruption and
expense to the Board, the Company and its Shareholders

 

Whilst the Board is confident that its position - that the Requisition Letter
is invalid pursuant to the Companies Act - is correct, the Board wishes to
avoid any costly and protracted court process that might follow if it were to
challenge the Requisition Letter's validity through formal legal channels. The
Board wishes to continue operating in an open and transparent manner and,
accordingly, the Board has decided to call the General Meeting to allow
Shareholders to vote on the Resolutions proposed and with the hope of drawing
a line under the actions of the Requestioning Shareholders and allowing the
Company to fully focus on its operational priorities.

 

Reabold is an investing company with a portfolio of upstream oil and gas
projects and therefore is not focused on revenue generation, instead seeking
to develop through asset value appreciation and monetisation. As noted in this
document, the Company seeks to keep its costs to a minimum and the time spent
and costs incurred as a result of the Requisition, including the nature of it
being legally invalid will hinder the Company's working capital position and
ultimately its net asset value, which is intrinsically linked to Reabold's
share price.

 

3.   Why the criticism of the Board by the Requisitioning Shareholders and
Proposed Directors should be dismissed out of hand

 

In various letters and exclusive press briefings, the Board notes a plethora
of criticism and allegations by the Requisitioning Shareholders and Proposed
Directors. Set out as follows is the Board's response to various of these
allegations.

 

Allegation

 

"The conditional sale of Corallian Energy; having expected a significantly
higher valuation."

 

Response

 

Reabold never guided to a sales price for Corallian, and therefore to talk
about expectations of a higher price is considered to be misleading. The sale
of Corallian was achieved as a result of an extremely thorough process run
over several months which fully tested the market, and the best offer was
accepted and subsequently the deal successfully executed.  According to our
analysis, the sale price is more than 50% higher than trading values of North
Sea peer companies with similar undeveloped assets, and c.30% higher than
comparable North Sea transactions for undeveloped assets.  This was despite
selling into a crowded market, with many competing asset packages for sale in
the North Sea.

 

The £32m gross (£12.7m net to Reabold) value of Corallian is a part of the
return on the £7.5m invested across Corallian's previously held seven assets
of which Reabold retains six (which the Requisitioning Shareholders tried to
buy to the detriment of all other Reabold Shareholders). Reinvestment of some
of the net sale proceeds will enable the Company to progress its strategy and
assets to generate even greater returns. The Company successfully monetised
its investment in Corallian and intends to continue to follow its strategy to
facilitate additional profitable exits and distributions to Shareholders.

 

The Requisitioning Shareholders attempted to prevent Reabold retaining
ownership of the six non-Victory Corallian licences and even attempted to
circumvent Reabold acquiring these assets by offering £500,000 (a 100%
premium to the acquisition price achieved by your Board) to Corallian for the
assets.

 

 

Allegation

 

"The lacklustre results of UK onshore licence PEDL 183 (West Newton)."

 

Response

 

It is the Board's opinion that due to the substantial progress at West Newton
since the Company invested, with two wells drilled and tested and with a third
well due in 2023, this is not factually correct. The recent CPR, commissioned
by Rathlin Energy (UK) Limited and undertaken by RPS Energy Canada Ltd,
published on 27 September 2022 estimates West Newton has gross 2C unrisked
recoverable resource of 197.6 bcf of sales gas, at an 86% geological chance of
success, which underpins the strong commercial and economic case, and
additional gross 2U unrisked prospective resource of 363.7 bcf of sales gas at
a 43% geological chance of success. Extensive work has been done by, inter
alia, Applied Petroleum Technology, CoreLab N.V. and RPS Group to model flow
potential from West Newton wells and inform the drilling and completion method
to achieve good well productivity. There has also been engagement ongoing with
various regulatory bodies including to secure planning permission for drilling
further wells at West Newton.  The future, the Board believes, augers well
for West Newton and it is confident in the ability of the management team to
carry the project forward.

 

Allegation

 

"The current board having failed to capitalise on the downtrend in oil prices
to acquire producing assets to secure the future of the business."

 

Response

 

Buying and operating producing assets is not part of the Company's strategy
nor business model which has been continuously articulated to and supported by
Shareholders. The Board does not know if acquiring producing assets would be
part of the strategy of the Requisitioning Shareholders as they have not set
out a strategy.

 

Allegation

 

"The Company's share price, and ultimately Shareholders, have suffered and
will continue to suffer given the Board's failings and a new board of
directors is recommended to advance the Company."

 

Response

 

The Board believes that the value of the portfolio of the Company has
continued to grow. The Board is considering the mechanisms available to it for
the intended £4 million distribution it will make to Shareholders on receipt
of the net proceeds from the sale of Corallian to Shell. The Company had a
cash balance of £3.6 million at the date of the last published accounts. The
Company expects to receive £3.2 million in cash in Q4 2022 at completion of
the sale of Corallian to Shell (first tranche), and a further £9.5 million in
cash (second tranche) is expected in 2023. The Company has c. £4m of reserves
available to facilitate a distribution.

 

This is an evolution of the business model and the Board will consider how to
return value to Shareholders from other future sales in consultation with
Shareholders.

 

Allegation

 

"A change in the board and direction of the Company is needed NOW to
significantly reduce the Company's general and administrative expenses."

 

Response

 

The Board believes that the Company's general and administrative expenses,
which are expected to be approximately £1.5 million for the current financial
year are amongst the lowest of its London listed peers.

 

Allegation

 

"A change in the board and direction of the Company is needed NOW to align the
Company's senior management with stakeholders by appointing directors with
meaningful stakes in the Company."

 

Response

 

The Board believes that the Proposed Directors are not at all aligned with
Shareholders, are driven by an intention to gain control of Reabold and have
multiple conflicts of interest.  The directors of Reabold own a combined
total of 3.11% of the Company's issued share capital and are completely
aligned with the interest of ALL Shareholders, not just a select few. Based on
the shareholder analysis available to the Company on 8 August 2022, Cathal
Friel, through Raglan Road Capital Limited owns 69,905,100 shares in Reabold
and Kamran Sattar owns 97,569,778 shares, which combined represents 1.87% of
the outstanding shares in Reabold. We do not believe that the other Proposed
Directors have any meaningful holding in the Company as at that date.

 

Allegation

 

"A change in the board and direction of the Company is needed NOW to pursue
funding initiatives to accelerate and maximise monetisation of the Company's
assets."

 

Response

 

The Company is well funded with the first tranche of the net proceeds of the
Corallian sale due shortly.  The Board is highly concerned about what this
allegation actually means for the Requisitioning Shareholders' strategy, which
has not been outlined, and could mean an imminent fundraising which the Board
does not consider to be appropriate.

 

Allegation

 

"It is unacceptable to have joint chief executive officers."

 

Response

 

The management team consists of only three people (two CEOs and a CFO) and
through these three positions, all functions of the business are covered.
Sachin and Stephen provide complimentary and broad skill sets ranging across
technical understanding of the asset base, business development, M&A,
financial management, strategy and stakeholder engagement, as well as the day
to day running of the business.  A number of similar listed companies have
larger management teams carrying out these activities, whilst Reabold has
always maintained a focus on being as lean as possible, and only took on a
full time CFO this year. Managing an asset base like the one within the
Reabold portfolio, as well as driving forward new investments and projects,
requires a significant amount of skill, experience and effort.  The Board
considers the team to match these demanding requirements. The fact that Sachin
and Stephen are both CEO in name reflects the collaborative nature of decision
making within Reabold. Out of this comes the innovative approach that Reabold
has taken to building a business, and a huge amount has been achieved in a
relatively short period of time.

 

Allegation

 

"Both CEOs, Sachin Oza and Stephen Williams, have significant conflicts of
interest, holding board positions in associated companies and drawing an
income from these roles."

 

Response

 

The Board believes that this statement is incorrect. The Board does not
believe that these are conflicting interests as Sachin Oza and Stephen
Williams are on these boards as Reabold's representatives, which is a key
aspect of the oversight Reabold maintains on its investments. Sachin Oza sits
on the Corallian board of directors and declined to take a director fee. The
modest fee he could have received which is in line with the other directors is
paid to Reabold instead of Sachin himself. Stephen Williams is a director of
Rathlin Energy (UK) Limited and Danube Petroleum Limited and declined to take
a director fee in both cases.  The modest fees he could receive which is in
line with the other directors of these companies is paid to Reabold instead of
Stephen.

 

Allegation

 

"Additionally, given the recent sale process, the Corallian directors will be
issued significant incentive bonuses. This significantly reduces the size of
the cash that will be distributed to the Reabold shareholders. This incentive
structure brings about inherent conflicts of interest questions, most notably
the potential for the Directors to be more focussed on maximising their
bonuses rather than representing the best interests of shareholders."

 

Response

 

The Board believes that this statement is incorrect. There is a significant
incentive package for Corallian management, which does not include Sachin Oza
as a non-executive director of Corallian, who receives no incentive bonus nor
any personal remuneration at all. The Corallian management has taken very
limited cash fees in return for their share options; a decision which was made
to reduce the cash funding requirement of Corallian and therefore Reabold.

 

Allegation

 

"Administrative expenses are excessive, particularly the directors' fees which
represent a significant cash drain on the business and ongoing liability, and
the concurrent lack of meaningful transactional activity and results is
alarming."

 

Response

 

The Board believes that the Company's general and administrative expenses,
which are expected to be approximately £1.5 million for the current financial
year are amongst the lowest of its London listed peers.  Regarding executive
remuneration, Reabold has a remuneration committee chaired by a senior
independent non-executive director in line with the QCA Code. Reabold's
executive remuneration is benchmarked by the remuneration committee. The
executive directors did not take a pay rise in 2022 despite the inflationary
environment.

 

Allegation

 

"We do not believe the board can execute a successful strategy. We believe the
conservation of capital is critical and urge shareholders to appoint a newly
constituted board to execute a strategy which is in the best interests of all
stakeholders."

 

Response

 

Reabold's strategy has been to identify low technical risk projects, which can
be progressed with a relatively modest amount of capital such that the Company
can take the asset to the point of monetisation / value realisation. Reabold
can use the proceeds generated from monetisation to reinvest in progressing
and growing the portfolio as well as providing a distribution to Shareholders.

 

Corallian was recently sold (for its Victory asset) for £32m (at
significantly above book value), £12.7m net to Reabold, whilst Reabold
retained all of the remaining Corallian licences for a consideration of
£250,000. The sale is proof of the Board's business model and strategy,
achieving monetisation of investments giving the Company financial flexibility
in which it could make a distribution to Shareholders and progress the
strategy from a re-capitalised footing, which is now being disrupted by the
Requisition.

 

The Company has also built a 56% economic ownership of West Newton which has
the potential to be the largest UK conventional onshore oil and gas discovery
since the 1970s.

 

Reabold has built a 50.8% equity interest in Danube Petroleum Romania and
established Reabold North Sea which has highly prospective licences in the
North Sea.

 

We are also acquiring the P2332 licence where we will be partnered with Shell
(operator) and set to benefit from the soon to be drilled Pensacola prospect
on the adjacent licence also operated by Shell.

 

Reabold has completed a number of corporate transactions to facilitate
monetisation of assets, including the sale of Corallian to Shell and
completion of the merger with Reabold California and Daybreak, a U.S. listed
company exchanging Reabold's California position for shares in Daybreak, such
that Reabold has a 42% interest in Daybreak.

 

Finally, we intend to make a £4 million distribution of cash to Shareholders
upon receipt of the second tranche of funds from Shell, the mechanism of which
is to be determined upon consultation with Shareholders.

 

The Board believes the next 12 months could prove to be an exciting time for
Reabold and its Shareholders. The Board expects to see the results from the
Pensacola well, future drilling on the North Sea portfolio following the
farmout process, and of course the drilling of the first horizontal well at
West Newton. The board has worked hard to build the portfolio that is able to
deliver this hugely exciting programme, and we look forward to taking all of
our Shareholders on that journey with us. We are also delighted to be able to
reward Shareholders with our intended maiden distribution next year, and
believe that many more will be forthcoming as the rest of the portfolio
matures.

 

4.   Action to be taken by Shareholders

 

Shareholders will find enclosed with this letter a Form of Proxy for use at
the General Meeting. The Form of Proxy should be completed and returned in
accordance with the instructions printed on it so as to arrive at Neville
Registrars Limited, by email to info@nevilleregistrars.co.uk, by post or by
hand (during normal business hours and by appointment only) at the following
address: Neville Registrars Limited, Neville House, Steelpark Road, Halesowen
B62 8HD as soon as possible and in any event not later than 10:00 a.m. on 15
November 2022.

 

Shareholders who hold their shares through CREST and who wish to appoint a
proxy for the General Meeting or any adjournment(s) thereof may do so by using
the CREST proxy voting service in accordance with the procedures set out in
the CREST manual. CREST personal members or other CREST sponsored members, and
those CREST members who have appointed a voting service provider, should refer
to that CREST sponsor or voting service provider(s), who will be able to take
the appropriate action on their behalf. Proxies submitted via CREST must be
received by the Registrar by no later than 10:00 a.m. on 15 November 2022.

 

5.   Recommendation

 

The Board Recommends Shareholders VOTE AGAINST ALL Resolutions at the General
Meeting

 

For the reasons noted above, the Board unanimously consider that the
Resolutions are not in the best interests of the Company. The Directors will
be voting against the Resolutions in respect of their own beneficial holdings.
The Directors hold 277,345,463 ordinary shares in aggregate, representing
approximately 3.11% of the issued share capital of the Company as at the Last
Practicable Date. The Board therefore strongly recommends that Shareholders
VOTE AGAINST ALL the Resolutions being proposed at the General Meeting.

 

6.   Due diligence on Proposed Directors

 

Any appointments to the board of an AIM company are subject to the
satisfactory completion of regulatory due diligence and appropriateness checks
by the Company's Nominated Adviser, which require the provision of relevant
documentation from any proposed director. None of the Proposed Directors put
forward as part of the Requisition has been subject to full due diligence, or
been approved by Strand Hanson, the Company's Nominated Adviser. Strand Hanson
has commenced this process in line with its requirements under the AIM Rules
for Companies and the AIM Rules for Nominated Advisers. Strand Hanson has not
yet received from the Proposed Directors all the requisite information
required to undertake its due diligence process.

 

Should the outstanding information requested from the Proposed Directors not
be provided within a sufficient period to allow Strand Hanson to make an
informed assessment of the proposed appointees by the time of the General
Meeting, including engaging external third party due diligence reports to be
commissioned (as required), or should Strand Hanson determine that any of the
Proposed Directors are not suitable to act as directors of the Company, Strand
Hanson may be forced to consider its position as nominated adviser to the
Company. In the event that Strand Hanson were to resign as nominated adviser,
the Company's ordinary shares would be suspended from trading immediately and,
in accordance with AIM Rule 1, the Company would then have one month to
replace Strand Hanson as nominated adviser, failing which the Company's
admission to trading on AIM would be cancelled.

 

Yours faithfully

 

Jeremy Edelman

Chairman

 

For any shareholder questions to the Company in relation to the information in
this document, please use the following contact details:

 

Telephone: +44 (0) 20 3781 8331

Email: reabold@camarco.co.uk

 

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