The Indicative Offer is at a premium of only 13% compared to the mid-market closing price of 6.8 pence per share on 1 November 2022. The directors of Hurricane (the "Board") have concluded that the Indicative Offer should not be recommended to shareholders
Hurricane Energy announces formal sale process, capital return and operational update. (Credit: John R Perry from Pixabay)
Hurricane Energy plc (“Hurricane” or the “Company”), the UK based oil and gas company, announces that, following receipt of an unsolicited offer and after a period of engagement with the bidder (the “Bidder”), Hurricane has received an offer for the entire issued share capital of the Company at an indicative price of 7.7 pence per share in cash (the “Indicative Offer”). The Indicative Offer is at a premium of only 13% compared to the mid-market closing price of 6.8 pence per share on 1 November 2022. The directors of Hurricane (the “Board”) have concluded that the Indicative Offer should not be recommended to shareholders.
The Company is in a very strong financial and operational position. However, Crystal Amber Fund Limited, which holds 28.9 per cent. of the Company’s shares and is the Company’s largest shareholder, has indicated to the Board its desire to monetise the value of its shareholding.
The Company has decided to launch a formal sale process (the “FSP”) as referred to in Note 2 on Rule 2.6 of the Code, in order to establish whether there is a bidder prepared to offer a value that the Board considers attractive, relative to the standalone prospects of Hurricane as a publicly traded company and accordingly one that should be recommended to all shareholders.
Whilst the outcome of the FSP is uncertain, the Board is confident of the ongoing strength of the Company’s business in both financial and operational terms, including its:
· Very strong financial position
o Debt free, with forecast year end net free cash[1] of c. $118 million (at $90/bbl oil)
o Decommissioning liabilities fully funded
· Valuable asset base
o Significant oil price-geared cash generation from predictable P6 well
o Material inventory held, covering drilling, completion and subsea equipment
· Significant tax loss position
o Over $370 million of value available in tax losses, as at 30 June 2022[2]
In the event that the FSP does not result in a transaction, the Board intends to commence a significant capital return programme with up to $70 million (equivalent to 3.1 pence per share[3]) to be returned to shareholders in Q1 2023, upon completion of a capital reduction. Following that, and in the absence of more favourable alternatives, further distributions could then be made during 2023 and beyond.
Formal Sale Process
The Board has appointed Stifel Nicolaus Europe Limited (“Stifel”) as its financial adviser with regards to the FSP and as independent financial adviser for the purposes of Rule 3 of the Code.
Parties interested in submitting any expression of interest should contact Stifel through the contact details given below. It is currently expected that any party interested in submitting any form of proposal will, at the appropriate time, enter into a non-disclosure agreement and standstill arrangement with the Company on terms satisfactory to the Board before being permitted to participate in the process.
The Company then intends to provide such interested parties with certain information on its business, following which interested parties shall be invited to submit their proposals to Stifel. The Company will update the market in due course regarding timings for the FSP.
Other than the unsolicited offer referred to above, the Company is not currently in discussions with, nor in receipt of an approach from, any potential offeror relating to an acquisition of the issued and to be issued share capital of the Company. The Bidder referred to above is participating in the FSP.
The Takeover Panel has agreed that any discussions with third parties may be conducted within the context of a FSP under the Code, which will enable conversations with parties interested in making a proposal to take place on a confidential basis.
The Takeover Panel has granted a dispensation from the requirements of Rules 2.4(b) and 2.6(a) of the Code such that any interested party participating in the FSP will not be required to be publicly identified (subject to note 3 to Rule 2.2 of the Code) and will not be subject to the 28 day deadline referred to in Rule 2.6(a), for so long as they are participating in the FSP.
The Board reserves the right to alter any aspect of the process as outlined above or to terminate the process at any time and in such cases will make an announcement as appropriate. The Board also reserves the right to reject any approach or terminate discussions with any interested party at any time.
This announcement is being made without the consent of the Bidder. Shareholders are advised this is not a firm intention to make an offer under Rule 2.7 of the Code and there can be no certainty that any offers will be made as a result of the FSP, that any sale or other transaction will be concluded, nor as to the terms on which any offer or other transaction may be made.
Philip Wolfe, Chairman of Hurricane commented: “The Board intends to deliver near term shareholder returns through either the successful outcome of the formal sale process or with a substantial capital return programme. Hurricane is in a strong position with an experienced senior team, robust balance sheet, profitable ongoing production and significant tax losses – a platform capable of supporting distributions throughout Lancaster’s expected economically productive life. We look forward to updating shareholders in due course.”
Source: Company Press Release