Tullow Oil proposes $750 million in rights issue
One of the world’s leading producers of oil, Tullow Oil PLC has proposed a rights issue of 466,925,724 new ordinary shares at 158.6 cents each to raise some $750 million.
The Rights Issue according to Tullow is expected “to assist the Group to accelerate the reduction of its debt,” by means of a 25 for 49 rights issue.
In a statement circulated to shareholders on March 21, 2017 and signed by the Chairman of Tullow Oil plc, Mr. Simon Thompson, said the Group would convene a general meeting in London on April 5, 2017 to seek approval from shareholders with a resolutions authorising the directors of the company to take certain actions in connection with Rights Issue.
The statement further said, “the Directors believe that the proposed Rights Issue is in the best interests of shareholders and the Directors recommend that shareholders vote in favour of each of the resolutions so that the Rights Issue may proceed.”
The oil and gas explorer said the issue price is a 45% discount to the closing price of 237.3 pence as at last week Thursday.
In a statement to the shareholders Tullow said “The proceeds of the Rights Issue (expected to be approximately £586 million net of expected issue costs and expenses), together with the Group's cash flow from production growth and portfolio management activities, are expected to assist the Group to accelerate the reduction of its debt”.
“The Directors believe this stepped reduction of debt will improve the company’s financial and operational flexibility, and enable growth within the next three to five years by allowing the Group to: invest in further infill drilling opportunities in both its operated and non-operated portfolio; undertake exploration and appraisal around the Jubilee and TEN fields to further develop the high return near field resource base; undertake further exploration and appraisal activity in Kenya to further shore up the resource base; drill high impact, potentially high return prospects across the company's African and South American portfolio; and finally take advantage of other opportunities that industry conditions offer,” the statement added.
The company it statement insisted that it is very important that shareholders vote in favour of the resolutions to be proposed at the General Meeting so that the Rights Issue may proceed.
At the General Meeting, shareholders will be asked to consider the following resolutions: “an ordinary resolution to approve the terms of the Rights Issue and to authorise the Directors to take all steps and enter into all agreements and arrangements necessary, expedient or desirable to implement the Rights Issue; an ordinary resolution, conditional upon the passing of Resolution 1, to authorise the Directors to allot shares in the Company up to a nominal amount of £46,692,572.40 (representing 466,925,724 ordinary shares) pursuant to or in connection with the Rights Issue.”
“If granted, this authority will apply until the date falling three months after the passing of the resolution; and a special resolution, conditional upon the passing of Resolutions 1 and 2, to give power to the Directors to allot up to 466,925,724 New Ordinary Shares, representing approximately 51 per cent of the company’s existing issued share capital and being the maximum number of New Ordinary Shares that could be allotted under the Rights Issue as if section 561 of the Companies Act 2006 (as amended) did not apply to such allotment. If granted, this authority will apply until the date falling three months after the passing of the resolution,” according to the statement.
The statement said these matters required shareholder approval by way of a resolution supported by a simple majority, in the case of an ordinary resolution, and 75 per cent, in the case of a special resolution, of shareholder’s present and voting at the General Meeting (whether in person or by proxy).
The statement further stated that, “the Rights Issue is being made to existing shareholders (although, with certain limited exceptions, not those in the United States, Canada, Australia, Hong Kong, Japan, New Zealand, Ghana, the People's Republic of China or the Republic of South Africa (the "Restricted Territories")) and is conditional, among other things, upon the passing of the resolutions at the General Meeting.”
Meanwhile the Tullow in its statement noted emphatically that, in the event that the resolutions are not passed at the proposed General Meeting, the Rights Issue would not proceed.
Commenting on the share offer the Chief Operating Officer and Chief Executive Officer-designate Paul McDade said, "Tullow has taken a number of significant steps since 2014 to re-set and restructure the business to ensure the Group is well positioned to meet the challenge of lower oil prices. As a result, we are now producing positive free cash flow and have begun the process of reducing our debt."
"Tullow has a strong set of low cost production, development and exploration assets in Africa and South America and, by accelerating the reduction of our gearing through this Rights Issue, we will be able to focus on growing our business by investing more across our portfolio and taking advantage of opportunities that industry conditions present," Mr. McDade added.