Sound Oil inks £14m Institutional investment agreements
Sound Oil, the Mediterranean focused upstream oil and gas company, has announced the successful completion of due diligence and the signing of investment agreements in respect of the £14 million Institutional funding announced by the Company on 25 April 2014 and expected to be completed in July 2014, the Company said in a press release.
Continental Investment Partners SA, acting on behalf of itself and affiliates (together the "Investor") has now successfully completed due diligence and signed the investment agreements, including a 50/50 debt/equity split which results in a total investment of £14 million at an average price of approximately 9.2 pence per share.
Metano Capital SA, a subsidiary of Continental Partners SA, has subscribed for £7 million of new ordinary shares in the Company ("Ordinary Shares") at a price of 8 pence per share (the "Subscription"), subject to approval by the Company's shareholders at the AGM on 25 June and to completion of the debt component of the transaction. On completion, Metano Capital SA will be interested in 87,500,000 Ordinary Shares in the Company, representing 21.07% of the Company's issued ordinary share capital, as enlarged by the Subscription. Metano have agreed to an 18 month lock-in period for half of the shares to be subscribed for and a 12 month lock-in period for the other half.
The Investor has also, conditional on the finalization of ancillary documentation and the Loan Conversion and Warrant Issue described below, subscribed for the remaining £5.5 million loan notes (see note below) and 52,884,615 detachable warrants to subscribe for new ordinary shares in the Company at a price of 10.4 pence per share at any point during the period of the loan.
On completion of the issue of the loan notes to the Investor, the existing £1 million loan from Simon Davies, a director of the Company, will convert into a new loan with the same par value, an annual coupon of 10% and repayable 3 years from the date of issue, as previously announced. This will also involve the issue of 9,615,385 warrants to Simon Davies on the same terms as the Investor's warrants (the "Loan Conversion and Warrant Issue").
As previously announced on 23 December 2013, Tony Heath, a Non Executive Director and Chairman of the Audit Committee, has advised the Company of his intention to retire at the AGM and will therefore step down from the Board on 25 June.
Marco Fumagalli, as representative of the Investor, will join the Board as a Non-Executive Director of the Company following completion of the Investor's investment in Sound Oil. Marco Fumagalli is Continental Investment Partners' Managing Partner and a well known Italian businessman who was previously a Group Partner at 3i.
Simultaneous with the transaction, the Remuneration Committee has awarded a total of 7.85 million share options to the Executive Team, of which 3,350,000 have been awarded to James Parsons, Sound Oil's Chief Executive Officer. These options are designed to retain the Executive Team and therefore vest after three years, expire after five years and are exercisable at a price of 8 pence per share - equal to the equity entry point of the Investor and the share price at the point of the Remuneration Committee's deliberations.
In addition the Remuneration Committee has awarded 598,564 shares to two non-board members of the Executive team. Application will be made to the London Stock Exchange for these shares, which rank pari passu with the Company's issued Ordinary Shares, to be admitted to trading on AIM. It is expected that Admission will become effective and that dealings will commence at 8am on 23 June 2014. Following the issue of these shares, and prior to the issue of the new Ordinary Shares to be issued in connection with the Subscription, the Company will have 327,800,815 Ordinary Shares in issue and there are no shares held in treasury. This is the total number of voting rights in the Company and may be used by shareholders as the denominator for the calculations by which they determine if they are required to notify their interest in, or change to their interest in, the Company under the Disclosure and Transparency Rules.
Sound Oil is a Mediterranean small cap exploration and production company, with a strong institutional cornerstone investor and strong liquidity. The Company is focused on onshore gas portfolio in Italy, which is a healthy blend of high upside exploration / development assets with some solid, cash generating production. This portfolio alone represents over a billion dollars of independently assessed net present value with annual free cash flows exceeding Euro 400 million.
