REG - Scirocco Energy PLC - Letter to Shareholders re Ruvuma Disposal

Scirocco EnergyAnnouncement

21/06/2022 07:00

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RNS Number : 5318P  Scirocco Energy PLC  21 June 2022

21 June 2022

Scirocco Energy plc

("Scirocco Energy" or "the Company")

Letter to Shareholders re Ruvuma Disposal

Scirocco Energy (AIM: SCIR), the AIM investing company targeting attractive
assets within the European sustainable energy and circular economy
markets, announces that Alastair Ferguson, Non-Executive Chairman, has
written a letter to all shareholders providing additional context on the
Board's strategic rationale for its proposed transaction with Wentworth
Resources as announced on 13 June 2022.

The full text of that letter is copied below.

"Dear fellow shareholders,

 

As communicated to you in the circular on 13 June 2022 and the webinar on 16
June 2022, the Company is proposing to dispose of its legacy Ruvuma asset and
notice was given of a General Meeting of the Company to take place at 10:30am
on 29 June 2022 at Pinsent Masons LLP, 141 Bothwell Street, Glasgow, G2 7EQ
where the proposition will be put to a vote as an ordinary resolution for
approval by holders of Ordinary Shares.

The circular, which includes the Principal Terms of the Proposed Transaction
with Wentworth Resources PLC, can be found on the Company's website at the
following address: https://www.sciroccoenergy.com/investors/circulars/
(https://www.sciroccoenergy.com/investors/circulars/)

Under the proposed Asset Purchase Agreement, the consideration for the Ruvuma
asset comprises:

 

·    initial consideration of $3,000,000 in cash payable upon completion
of the Proposed Transaction and prior to Completion and subject to
satisfaction of certain conditions Wentworth will make a loan of $500,000
available to Scirocco (the "Initial Loan Amount"); plus

 

·    contingent deferred consideration of up to $13,000,000 in aggregate,
made up of the following payments:

o  $3,000,000 to be paid following the date on which the operating committee
provides final approval of a development plan under the Ruvuma JOA;

o  $8,000,000 which shall be payable from first gas on the Ruvuma Asset where
the net revenues payable to Wentworth under any sale arrangements shall be
payable 75% to Wentworth and 25% to Scirocco until such time as Scirocco has
been paid $8,000,000; and

o  $2,000,000 following the date on which the cumulative gross production
from the Ruvuma Asset is equal or greater than 50 billion cubic feet.

 

The Asset Purchase Agreement was the result of an exhaustive two-year process,
and the Directors unanimously agree that it represents the best possible deal
for Scirocco to realise value from the asset, while retaining material upside
exposure in the success case of Ruvuma.

At the same time, the deal significantly strengthens the Company's balance
sheet by providing an immediate and non-dilutive injection of funds, allowing
Scirocco to pursue its current investing strategy targeting cash-generative
assets within the sustainable energy and circular economy markets, as approved
by shareholders at the Annual General Meeting of 9 July 2021.

All shareholders are encouraged to vote in favour of the proposed transaction

It is the duty of the Board and management to safeguard the interest of all
shareholders and make decisions that we believe are in the best interest of
the Company.  The intention of the proposed divestment that we are asking
shareholders to vote on has been communicated clearly by the Company through
the two-year sales process and is wholly consistent with the revised investing
strategy set out by Scirocco's Board.

Completion of the divestment will enable the Company to accelerate its growth
strategy, which we believe will enable the Board to build a business with a
long-term future capable of generating sustainable returns for its
shareholders. As such, the Board encourages all shareholders to cast their
vote and strongly recommend that shareholders vote in favour of passing the
proposed acquisition at the upcoming General Meeting.

Should the resolution not be passed, the Company will be required to fulfil
its near-term funding obligations on the Ruvuma asset which can only be
achieved by raising further equity, likely in excess of its current market
capitalisation, and at a level of issuance and price that would be highly
dilutive for existing shareholders.  There are no guarantees that the Company
will be able to raise the capital required to meet near-term obligations which
would likely lead to the Company defaulting on its financial commitments and
potentially relinquish its interest in Ruvuma for zero consideration.

It should also be recognised that success is not guaranteed in the upcoming
CH-1 well and the ultimate approval, extent of or timing of a related
development is also uncertain. The Ruvuma project involves significant
technical and subsurface uncertainties, meaning the Company would retain
material downside exposure associated with the project, as well as the
potential long-term requirement for large capex expenditure, implying further
dilutive capital raises in order to maintain our interest. Those factors and
the significant concentration in a single asset lead to the Board and
management to conclude that this is not an appropriate risk/reward profile for
Scirocco and does not provide a reasonably deliverable path to growth or
cashflow.

It is therefore the firm belief of the Director's that the passing of the
Resolution is in the best interests of the Company and Shareholders, and we
unanimously recommend shareholders vote in favour.

The Directors who hold shares, totalling 3.2% of the issued share capital,
will be voting in favour of the proposal. Additionally, the Company has
received letters from significant shareholders representing 11.1% of the
Company's issued share capital which confirm they are supportive of the
proposed transaction and that it is their current intention to vote in favour
of the resolution at the General Meeting.

Shareholders can submit their vote by completing the below proxy form
(available on the website) and emailing the completed form to
Voting@shareregistrars.uk.com (mailto:Voting@shareregistrars.uk.com) .

https://d1ssu070pg2v9i.cloudfront.net/pex/scirocco/2022/06/13152517/FINAL-PROXY.pdf
(https://d1ssu070pg2v9i.cloudfront.net/pex/scirocco/2022/06/13152517/FINAL-PROXY.pdf)

 

For shares held in nominee accounts you have to contact your appointed broker
to instruct them as to your voting intentions.

We look forward to the successful completion of this transaction and moving
forward as a well-funded, strategically focused company with a clear vision to
deliver sustainable long-term value for the Company's shareholders.

 

Sincerely,

Alastair Ferguson

Non-Executive Chairman of the Board of Scirocco

 

 

 

For further information:

 Scirocco Energy plc                            +44 (0) 20 7466 5000

 Tom Reynolds, CEO

 Doug Rycroft, COO

 Strand Hanson Limited, Nominated Adviser       +44 (0) 20 7409 3494

 Ritchie Balmer / James Spinney / Rory Murphy

 WH Ireland Limited, Broker                     +44 (0) 207 220 1666

 Harry Ansell / Katy Mitchell

 Buchanan, Financial PR                         +44 (0) 20 7466 5000

 Ben Romney / Jon Krinks

 

 

 

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