12 Aug 2019
Conversion and Restructuring of Convertible LoansIndependent Oil and Gas plc ("IOG" or the "Company"), the development and production company focused on becoming a substantial UK gas producer, is pleased to provide an update on its capital structure, further to its 26 July 2019 RNS.
As notified in that announcement, and in the context of the proposed farm-out (the “Farm-out”) and bond (“Bond”) transactions outlined therein, the Company’s main creditor London Oil and Gas (LOG) was due to decide its preferred treatment of its existing convertible loan facilities by 9 August 2019. These facilities include two £10 million loans, signed in February 2016 and February 2018, whose principal and accrued interest are convertible into Ordinary Shares at 8p and 19p respectively (the “February 2016 Loan” and the “February 2018 Loan”).
February 2016 Loan
On 9 August LOG duly informed the Company of its intention to convert the February 2016 Loan principal and interest up to a 29.99% holding in IOG and exchange the balance of the February 2016 Loan into long-term, unsecured, non-interest bearing loan notes convertible at 8p (the “Series A Loan Notes”). This conversion will take effect on completion of the Farm-out. Assuming completion in early September 2019, the principal and accrued interest is expected to amount to approximately £10.8 million.
As the completion date is in the future, the following numbers are provided as guidance. Given LOG’s existing holding of 20,497,204 Ordinary Shares in IOG, it is expected that £9.4 million of the February 2016 Loan will be converted into 116,964,275 Ordinary Shares, with the remaining £1.4 million to be exchanged into the Series A Loan Notes, expected to be convertible into 17,700,000 Ordinary Shares.
Following Admission of these February 2016 Loan conversion shares at Farm-out completion, there would then be 458,297,205 Ordinary Shares in issue.
February 2018 Loan
Further, LOG has elected to exchange the February 2018 Loan principal and accrued interest into long-term, unsecured, non-interest bearing loan notes convertible at 19p (the “Series B Loan Notes”). Again, assuming completion in early September 2019, the principal and accrued interest is expected to amount to approximately £11.4 million. The Series B Loan Notes would be convertible into 60,091,826 Ordinary Shares.
Other LOG Assets
As previously indicated, on Farm-out completion, IOG will repay in full LOG's non-convertible debt, currently £16.6 million including accrued interest. As a result of the above conversion, exchange and repayment, the Company’s post-Farm-out assets will be left unencumbered to be pledged as security for the Bond.
Following Farm-out completion, sales of shares held by LOG will be subject to orderly market restrictions for a period of 12 months. LOG’s warrants will remain in place.
Salary Sacrifice Options and Long-Term Incentive Options
Further to recent option exercises, the total current amount of board and management salary sacrifice options outstanding is 2,517,461, which are held by a number of current and former IOG personnel. The management salary sacrifice scheme remains in place until FID, and a further six-month tranche of options in lieu of salary is due to be awarded at the end of August 2019 (the amount will be determined by the volume weighted average price of the Ordinary Shares over the preceding six months).
The total current amount of board and management long-term incentive options is 10,600,000. These options all vest three years from the date of grant and are subject to certain operational, health and safety and other targets having been met. Further details of these options can be found in the announcements dated 1 May 2019 and 8 May 2019.
Post-Completion Share Capital
Further to the above, to provide guidance as to the Company’s proforma share capital at Farm-out completion, assuming completion occurs in early September 2019, the total shares in issue and fully diluted share capital position are expected to be as follows:
|Amount||% of Issued||% of Fully Diluted|
|Shares in issue (less LOG shares)||320,835,546||70.01%|
|February 2016 LOG Loan conversion||116,964,275||25.52%|
|Total LOG Shares||137,461,479||29.99%|
|Expected Total Shares at completion||458,297,025||100.00%||78.58%|
|Series A Convertible Loan Notes||17,700,000||3.03%|
|Series B Convertible Loan Notes||60,091,826||10.30%|
|Salary Sacrifice Options||2,517,461||0.43%|
|Expected New Salary Sacrifice Options*||750,000||0.13%|
|Long-Term Incentive Options**||10,600,000||1.82%|
|Expected Total Fully Diluted Shares||583,233,622||100.00%|
*Amount shown is a forecast of 1p options in lieu of salary sacrificed over the period 1 March 2019 – 31 August 2019, to be issued at the end of that period. The actual amount will depend on volume weighted average share price over the relevant period.
**Vesting period of 3 years from date of grant plus other conditions
***Three different tranches of warrants held by LOG: 7,500,000 with an exercise price of 8p, 5,777,310 with an exercise price of 11.9p and 20,000,000 with an exercise price of 32.18p
Andrew Hockey, CEO of IOG, commented:
This conversion and restructuring of the LOG facilities is an important step in the process of completing our announced farm-out transaction and reaching Final Investment Decision. These steps simplify and clarify our capital structure and LOG’s relinquishment of security will enable us to undertake our intended bond issue. Upon completion, the bond is intended to be the Company’s sole long-term secured debt.
Independent Oil and Gas plc +44 (0) 20 3879 0510
Andrew Hockey (CEO)
James Chance (CFO)
Rupert Newall (Head of Corporate Finance)
finnCap Ltd +44 (0) 20 7220 0500
Christopher Raggett, Simon Hicks (Corporate Finance)
Camille Gochez (Corporate Broking)
Peel Hunt LLP +44 (0) 20 7418 8900
Vigo Communications +44 (0) 20 7390 0230
About Independent Oil and Gas:
Subject to completion of the farm-out transaction announced on 26 July 2019, IOG will own and operate a 50% stake in substantial low risk, high value gas reserves in the UK Southern North Sea. The Company’s Core Project targets a gross 2P peak production rate of 146 MMCF/d (c. 25,000 Boe/d) from gross 2P gas Reserves of 302 BCF² + 2C gas Contingent Resources of 108 BCF³, via an efficient hub strategy. In addition to the independently verified 2P reserves at Blythe, Elgood, Southwark, Nailsworth and Elland and 2C Contingent Resources at Goddard, IOG also has independently verified best estimate gross unrisked prospective gas resources of 73 BCF³ at Goddard and management estimated best estimate gross unrisked prospective gas resources of 129 BCF¹ at Harvey. Alongside this IOG continues to pursue value accretive acquisitions to generate significant shareholder returns.