REG - Longboat Energy PLC - Sale of Shares in LJN & Exit from Norway

Longboat EnergyAnnouncement

17/06/2024 07:15

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RNS Number : 5999S  Longboat Energy PLC  17 June 2024

THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION FOR THE PURPOSES OF ARTICLE 7 OF
REGULATION 596/2014 AS AMENDED AND TRANSPOSED INTO UK LAW IN ACCORDANCE WITH
THE EUROPEAN UNION (WITHDRAWAL) ACT 2018 ("UK MAR").

 

17 June 2024

 

Longboat Energy plc

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

 

Sale of Shares in Longboat Japex Norge and Exit from Norway

 

Longboat Energy, an emerging full-cycle E&P company, announces it has
reached agreement to sell its 50.1% holding in Longboat Japex Norge AS ("LJN")
to its joint venture partner Japan Petroleum Exploration Co. Ltd ("JAPEX").

 

Transaction Highlights

 

·    Longboat to sell its interest in LJN to JAPEX for a cash
consideration of $2.5 million plus Longboat's share of drawn debt under the
JAPEX Acquisition Facility (currently $8.5 million net)

·    JAPEX to assume all future financial obligations of the joint venture

·    Proceeds to be used to fund Longboat's working capital and operations
in Malaysia

·    Plan to pivot Longboat's strategy to build a business in Southeast
Asia

 

Transaction Detail

 

In light of the near-term financial challenges facing the business, the board
and management of Longboat Energy have made the decision to exit Norway to
ensure capital is being directed towards the areas with the greatest
value-creation potential for an E&P company with a limited capital base.

 

This decision follows the continuing scarcity of acquisition opportunities
suitable for Longboat, the disappointing performance of the Statfjord
Satellites (comprised of a 4.80% unitised interest in the Statfjord Øst Unit
and a 4.32% unitised interest in the Sygna Unit) and slow progress on
monetising the Kveikje discovery (LJN, 10%), all of which have contributed to
a near-term projected working capital shortfall in LJN which could result in
Longboat forfeiting some-or-all of its shares in LJN.

 

Following a process to explore all options available to the Company under the
Shareholder Agreement to realise value for shareholders, Longboat has entered
into a sale and purchase agreement to sell its 50.1% interest in LJN to its
joint venture partner, JAPEX, for a cash consideration of $2.5 million payable
on completion (the "Transaction") plus the assumption of the entire debt drawn
by LJN under the Acquisition Bridge Facility ("Acquisition Facility") provided
to the joint venture by JAPEX. Net drawings to Longboat under the Acquisition
Facility are currently $8.5 million ($17 million gross).

 

As part of the Transaction, JAPEX will also assume all financial obligations
associated with LJN including all staff and running costs going forward and
has amended the Acquisition Facility pre-completion to allow further drawings
to manage the immediate working capital needs at LJN. The Management Services
Agreement providing for transitional services between LJN and the Company will
remain in-place until 30 September 2024 resulting in an estimated net outflow
of up to ~£20k per month until that point.

 

The Transaction remains subject to regulatory approvals in Norway, approval by
the lenders under the Exploration Finance Facility and the transfer of any
third-party contracts. In the period prior to completion, Longboat has agreed
to vote in favour of certain resolutions put to the LJN board as instructed by
JAPEX.

 

Completion of the Transaction is anticipated during Q3 2024. If the
Transaction does not complete, as previously announced by the Company,
Longboat is forecast to have limited liquidity during H2 2024 and will require
additional funding. In the event Longboat cannot meet its share of additional
working capital shortfalls at LJN in a timely fashion, the terms of the
Shareholder Agreement and Acquisition Facility could result in Longboat
forfeiting some-or-all of its shares in LJN.

 

Impact of the Transaction

 

As detailed in its Report and Accounts to 31 December 2023, Longboat now
equity accounts for the LJN joint venture in its financial statements and
therefore the Transaction is not anticipated to have an impact on its future
profitability. The loss after tax attributable to the in the year to 31
December 2023 was £5.3 million.

 

As at 31 December 2023, Longboat had a carrying value of £12.5 million for
its investment in LJN, which made certain assumptions on the performance of
LJN's asset base, which will be significantly impaired at the next reporting
date to reflect the sales price. The reduction in value in Longboat's
investment into LJN is directly attributable to the performance of the
underlying assets and certain restrictive provisions in the Shareholder
Agreement which limit the marketability of the LJN shares.

 

Due to the equity accounting of the joint venture, Longboat does not book oil
& gas reserves related to LJN and the previous production guidance range
detailed on 29 May 2024 should now be disregarded.

 

Use of Proceeds

 

Longboat intends to use the proceeds from the Transaction to fund its working
capital requirements and ongoing operations in Malaysia as part of the
Company's plan to pivot its efforts to building a business in Southeast Asia.
The Transaction consideration, along with ongoing efforts to cut Longboat's
cost base, are forecast to provide capital to run the Company through the end
of Q1-25.

 

The change in geographic focus is detailed in a separate press release made by
the Company today.

 

Related Party Transaction

 

At the time of the entry into the Transaction, JAPEX was a Related Party of
the Company and therefore the entry into the sale of the shares in LJN by
Longboat, amendment to the Acquisition Facility and amendment to the
Management Services Agreement are deemed to be Related Party Transactions
under Rule 13 of the AIM Rules. The Company's directors consider, having
consulted with Stifel, the Company's Nominated Adviser, that the terms of
Transaction are fair and reasonable insofar as shareholders are concerned.

 

Nick Ingrassia, CEO of Longboat commented:

"I am proud of what Longboat and its team has achieved in the three years
since it became active in Norway. In this short period, the business safely
drilled nine exploration wells resulting in six hydrocarbon discoveries, was
awarded two APA licenses in the highly prolific Norwegian North Sea, executed
a total of seven transactions and welcomed JAPEX as an active participant into
the Norwegian Continental Shelf through the creation of an innovative joint
venture.

While we leave Norway with mixed emotions, I am pleased that the transaction
delivers JAPEX a full-cycle business with an exceptional team, providing an
excellent platform for a large company with access to significant capital to
build long-term success."

Ends

 Enquiries:
 Longboat Energy                                   via FTI
 Nick Ingrassia (Chief Executive)

 Stifel (Nomad and Joint Broker)                   Tel: +44 20 7710 7600
 Callum Stewart                                    SNELLongboatEnergy@Stifel.com

 Jason Grossman

 Ashton Clanfield

 Cavendish Capital Markets Limited (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

 

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