Northern Petroleum provides company updates, divests interests in assets

Posted by Katie Woodward - OilVoice


Northern Petroleum, the AIM quoted oil company focusing on production led growth, announces that it has agreed to divest interests in its assets, as detailed below, to High Power Petroleum LLC, for a consideration of US$2.5 million in cash and the application of US$0.25 million of well stimulation services  by Blue Spark Energy Inc., an affiliate of H2P based in Calgary.

The Company also announces a proposed direct subscription, subject to shareholder approval, to raise gross proceeds of up to £5.1 million at a price of 3.5 pence per subscription share through a first tranche subscription of 124,047,017 new ordinary shares and a second tranche subscription of up to 20,600,000 new ordinary shares, both at the Issue Price. The Issue Price represents a premium of 12.0 per cent. to the middle market closing price per ordinary share of 3.125 pence on 29 November 2016, being the last business day prior to this announcement.

A proposed open offer for up to 21,500,000 new ordinary shares with nominal value of 1 pence each in the capital of the Company at the Issue Price, raising up to an additional £0.8 million, will be made to existing qualifying shareholders. Total funds realised from the Consideration, the Subscription and Open Offer will total up to US$9.7 million (approximately £7.8 million).


The Disposals

  • Subject to the approval of the Subscription by shareholders, the Company will divest to H2P for the Consideration the following interests in the Group's assets (the "Disposals"):
    • a 25 per cent. interest in all of the Company's Canadian licences, wells and facilities ("Canadian Assets");
    • a 10 per cent. interest in the Company's Italian offshore southern Adriatic exploration permits ("Italian Permits") and exploration permit applications ("Italian Applications"), if granted; and
    • a 25 per cent. interest in the Company's onshore Australian licence ("Australian Asset").
  • The Company has also agreed to grant H2P options to increase its interest in the Group's assets as follows:
    • an increase in the Canadian Assets from 25 per cent. to 50 per cent. by agreeing to pay an additional US$4 million before 31 December 2017;
    • an increase in the Italian Permits and Italian Applications, if granted, from 10 per cent. to 50 per cent. by funding an appraisal well on the Giove oil discovery in permit FR.40 up to a cap of US$15 million; and
    • an increase in the Australian Asset from 25 per cent. to 50 per cent. by funding US$1 million of seismic acquisition and processing.

The Subscription and Open Offer

  • The Subscription has been agreed, subject to shareholder approval, of up to 144,647,017 Ordinary Shares at the Issue Price as follows:
    • H2P, Cavendish Asset Management Limited ("Cavendish"), City Financial Investment Company Limited ("City Financial") and one further financial institution have agreed to subscribe for a total of 124,047,017 Ordinary Shares under the First Tranche Subscription, raising proceeds of £4.3 million, before expenses;
    • an Open Offer will be made to enable all qualifying shareholders to participate in the fundraising at the Issue Price for up to 21,500,000 Ordinary Shares; and
    • in addition, H2P and Cavendish have agreed to subscribe, once the results of the Open Offer are known, for up to an additional 20,600,000 Ordinary Shares under the Second Tranche Subscription to maintain a shareholding of 29.99 per cent. and 19.0 per cent. respectively.

AMI and board appointment

  • The Company and H2P have entered into an Area of Mutual Interest Agreement ("AMI") to jointly pursue new opportunities in Alberta and Saskatchewan, Canada
  • H2P will have the right to appoint a non-executive director to the board of the Company
  • The proceeds of the Disposals, Subscription and Open Offer will be used primarily to fund the Company's share of the forthcoming winter work programme in Canada and further production redevelopment in Canada in 2017 as well as the acquisition of 3D seismic in the southern Adriatic and the general working capital requirements of the Company


H2P is a wholly-owned oil and gas exploration and production subsidiary of I-Pulse Inc., a technology company which develops and commercialises high pulse power solutions with multi-sector and cross-industry applications, particularly for the natural resources sector. H2P is investing in a broad portfolio of upstream oil and gas assets, leveraging the I-Pulse group's unique proprietary technologies in well stimulation, ‎production optimisation and electro-magnetic exploration surveying applications, to create an enhanced economic return.

Keith Bush, Chief Executive Officer, commented:

"The introduction of H2P as a strategic investor at both the asset level and as a corporate shareholder marks a step-change for the Company. The investment across the Company's asset portfolio validates the strategy we have pursued with production led growth in Canada and the Italian exploration and appraisal portfolio providing the possibility of very large returns in the medium to long term. Not only does H2P bring strong financial support, they provide rigorous technical review and innovative technology to help enhance our asset value.

"Continued support from our other key shareholders, Cavendish and City Financial, combined with H2P gives the Company a strong financial base from which to grow production in Canada and develop the Italian portfolio. Asset acquisition opportunities are still coming on to the market in Canada, and through the AMI we can now pursue these with a well financed and capable partner, to help accelerate growth in Canada and build a material production business.

"With the business now strengthened it is important that the Company's existing private shareholders can invest alongside our new shareholder through the open offer and benefit from the value that will result from this new partnership."

Scott Aitken, Chief Executive Officer of H2P, commented:

"We are very pleased to be partnering with Northern Petroleum across their asset base. Their strategy of building production and cashflow in Canada while maturing exploration and appraisal opportunities in Italy is closely aligned with how we are building our exploration and production operations. We believe H2P can add technical expertise along with the potential enhancements of our pulse technology, initially starting with well stimulations in Canada."

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Northern PetroleumAIMH2PFinanceAustraliaItalyCanada

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