representing up to approximately 9.1 per cent of Tullow Oil's existing issued ordinary share capital (“the Placing”), with both new and existing institutional investors.
The Placing is being conducted, subject to the satisfaction of certain conditions, through an accelerated book-building process to be carried out by Merrill Lynch International ("Merrill Lynch") and RBS Hoare Govett Limited ("RBS Hoare Govett"), who are acting as joint bookrunners (the “Joint Bookrunners”). The timing of the closing of the book, pricing and allocations are at the discretion of Tullow Oil, Merrill Lynch and RBS Hoare Govett. The number of Placing Shares and the price at which the Placing Shares are to be placed (the "Placing Price") are subject to agreement between Tullow Oil, Merrill Lynch and RBS Hoare Govett at the close of the book-building process. Details of the number of Placing Shares and the Placing Price will be announced as soon as practicable after the close of the book-building process.
The Placing Shares will, when issued, be credited as fully paid and will rank pari passu in all respects with the existing ordinary shares of 10 Pence Sterling each in the capital of the Company, including the right to receive all dividends and other distributions declared, made or paid on or in respect of such shares after the date of issue of thes Placing Shares. The Placing will be made on a non-pre-emptive basis. If all the Placing Shares are placed, it would represent an increase of approximately 9.1 per cent. of the current issued ordinary share capital of the Company, and the Placing Shares would represent approximately 8.4 per cent. of the enlarged issued ordinary share capital of the Company.
The Company will apply for admission of the Placing Shares to listing on the Official List of the Financial Services Authority, to trading on the main market of the London Stock Exchange and trading on the Irish Stock Exchange ("Admission"). It is expected that Admission will take place and that trading will commence on 26 January 2009 (the "Closing Date").
The Placing is conditional upon, inter alia, Admission becoming effective. The Placing is also conditional on the placing agreement between the Company, Merrill Lynch and RBS Hoare Govett not being terminated.
The Appendix to this announcement (which forms part of this announcement) sets out the terms and conditions of the Placing.
Background to the Placing
Tullow's business has continued to perform very strongly in 2008. A 100% exploration success rate was achieved in Ghana and Uganda and overall the Group’s exploration drilling programme has resulted in 17 discoveries from 22 wells. Booked Commercial ReservesThe estimated quantities of oil and gas recoverable under existing economic and operating conditions and Contingent ResourcesThose quantities of petroleum estimated to be potentially recoverable but not yet considered mature enough for commercial development due to one or more contingencies. are expected to be upgraded to approximately 800 mmboeMillion barrels of oil equivalent at the end of 2008 compared with 551 mmboeMillion barrels of oil equivalent a year ago.
In Ghana, the recent Mahogany-3 and Hyedua-2 appraisal results have indicated the scope for additional phases of development on the Jubilee field and validated the fast track development decision for Phase 1. Resource potential of up to 1.8 billion barrels for the Jubilee field has been confirmed with a P50 most likely case upgraded to 1.2 billion barrels. Most recently, the Hyedua-2 test flowed at 16,750 bopdBarrels of oil per day. This result has provided a strong underpinning to the Phase 1 Jubilee development by confirming good reservoir connectivity and high productivity which indicates future production well deliverability in excess of 20,000 bopdBarrels of oil per day. In addition, this result has contributed to Tullow’s independent auditor assessing that 170 mmbo of Commercial ReservesThe estimated quantities of oil and gas recoverable under existing economic and operating conditions can be booked at year end, equivalent to 490 mmbo of gross field reserves. First oil remains on target for the second half of 2010.
In Uganda, the discovery of the Buffalo oil field in December 2008 ensured that the resources threshold for commercial development has been achieved. Significant further exploration success has now been announced this month with the Giraffe discovery, which is one of the largest recent onshore oil discoveries in Africa. These latest results mean that Lake Albert is Tullow’s second world class basin and options for commercialisation and first oil production are now being fast tracked.
Phase 1 of the Jubilee development project is now substantially under way. Tullow's existing reserve based lending facility, which matures in 2012, is underpinned by a strong syndicate of 18 banks. Tullow has been working very closely with this syndicate and certain new banks to incorporate the first phase of the Ghana Jubilee project, together with the existing production assets, into a new combined facility of up to $2bn. Approval from banks of facilities of $1.15bn (c.60%) is already in place with the remainder of banks well advanced in their internal process and scheduled to seek credit committee approval before the end of January. Tullow is highly confident of securing an increased reserve based lending facility sufficient to deliver upon its existing development expenditure, including the first phase of the Jubilee field development. Financial close is targeted for February, 2009.
Use of Proceeds
Tullow will fund Jubilee Phase 1 and existing mature production activities from these reserve based lending debt facilities. However, Tullow is now in the middle of a very exciting period for its Ghanaian and Ugandan operations with further transformational exploration wells to be drilled in the first half of 2009. In particular, this includes the Tweneboa and Teak exploration wells in Ghana, which are of a similar play type to the Jubilee field. Tullow may also undertake further appraisal of the Jubilee field beyond Phase 1. In Uganda, Tullow will soon drill the Ngassa well in Lake Albert, the largest prospect identified so far in the region, as well as continuing to appraise and commercialise the area on a fast track basis.
In 2009, Tullow will also seek to augment underlying cash flow through ongoing active portfolio management and careful allocation of discretionary capital. Given the significant success of Tullow's ongoing drilling campaigns, the Company believes that it is now appropriate to increase its equity capital base to finance these exciting growth opportunities. As well as strengthening the balance sheet, today’s placing will allow Tullow to fund selective high impact exploration and appraisal opportunities in Ghana, to commercialise its world class asset in Uganda and also take advantage of other opportunities that may present themselves in the coming months.
Commenting on the proposed Placing, Aidan Heavey, Chief Executive Officer said:
Tullow has had an outstanding year in 2008 and in recent weeks has announced major exploration and appraisal success in both Ghana and Uganda. Further potentially transformational wells will be drilled in 2009 in both locations. The Jubilee Phase 1 development is on track and the potential for additional phases has been confirmed. Secondly, Tullow has significantly exceeded the threshold in Uganda and now also regards the Lake Albert area as a world class basin. This success and future prospectivity, combined with the Placing announced today and the imminent closure of Tullow’s debt refinancing, will mean that Tullow will start 2009 from a position of significant financial and operational strength.
This announcement contains (or may contain) certain forward-looking statements with respect to certain of Tullow Oil's plans and its current goals and expectations relating to its future financial condition and performance and which involve a number of risks and uncertainties. Tullow Oil cautions readers that no forward-looking statement is a guarantee of future performance and that actual results could differ materially from those contained in the forward-looking statements. These forward-looking statements can be identified by the fact that they do not relate only to historical or current facts. Forward-looking statements sometimes use words such as "aim", "anticipate", "target", "expect", "estimate", "intend", "plan", "goal", "believe", or other words of similar meaning. Examples of forward-looking statements include, amongst others, statements regarding Tullow Oil’s oil and gas Contingent Reserves, future financial position, income growth, impairment charges, business strategy, projected levels of growth in the banking and financial markets, projected costs, estimates of capital expenditure, and plans, dividend growth and objectives for future operations of Tullow Oil and other statements that are not historical fact. By their nature, forward-looking statements involve risk and uncertainty because they relate to future events and circumstances, including, but not limited to, UK domestic and global economic and business conditions, the effects of continued volatility in credit markets, market-related risks such as changes in interest rates and exchange rates, the policies and actions of governmental and regulatory authorities, changes in legislation, the further development of standards and interpretations under International Financial Reporting Standards ("IFRS") applicable to past, current and future periods, evolving practices with regard to the interpretation and application of standards under IFRS, the outcome of pending and future litigation or regulatory investigations, the success of future explorations, acquisitions and other strategic transactions and the impact of competition - a number of which factors are beyond Tullow Oil's control. As a result, Tullow Oil’s actual future results may differ materially from the plans, goals, and expectations set forth in Tullow Oil's forward-looking statements. Any forward-looking statements made herein by or on behalf of Tullow Oil speak only as of the date they are made. Except as required by the Financial Services Authority (the “FSA”), the London Stock Exchange, the Irish Stock Exchange or applicable law, Tullow Oil expressly disclaims any obligation or undertaking to release publicly any updates or revisions to any forward-looking statements contained in this announcement to reflect any changes in Tullow Oil's expectations with regard thereto or any changes in events, conditions or circumstances on which any such statement is based.
This announcement is for information purposes only and shall not constitute an offer to buy, sell, issue, or subscribe for, or the solicitation of an offer to buy, sell, issue, or subscribe for any securities, nor shall there be any sale of securities in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such jurisdiction. This announcement has been issued by and is the sole responsibility of Tullow Oil.
No representation or warranty, express or implied, is or will be made as to, or in relation to, and no responsibility or liability is or will be accepted by Merrill Lynch, RBS Hoare Govett or by any of their respective affiliates or agents as to, or in relation to, the accuracy or completeness of this announcement or any other written or oral information made available to or publicly available to any interested party or its advisers, and any liability therefore is expressly disclaimed.
Merrill Lynch International, which is authorised and regulated in the United Kingdom by the FSA, is acting for Tullow Oil and for no-one else in connection with the Placing, and will not be responsible to anyone other than Tullow Oil for providing the protections afforded to customers of Merrill Lynch International or for providing advice to any other person in relation to the Placing or any other matter referred to herein.
RBS Hoare Govett, which is authorised and regulated in the United Kingdom by the FSA, is acting for Tullow Oil and for no-one else in connection with the Placing, and will not be responsible to anyone other than Tullow Oil for providing the protections afforded to customers of RBS Hoare Govett nor for providing advice to any other person in relation to the Placing or any other matter referred to herein.
The distribution of this announcement and the offering of the Placing Shares in certain jurisdictions may be restricted by law. No action has been taken by Tullow Oil or the Joint Bookrunners that would permit an offering of such shares or possession or distribution of this announcement or any other offering or publicity material relating to such shares in any jurisdiction where action for that purpose is required. Persons into whose possession this announcement comes are required by Tullow Oil and the Joint Bookrunners to inform themselves about, and to observe such restrictions.
The price of shares and the income from them may go down as well as up and investors may not get back the full amount invested on disposal of the shares.
MEMBERS OF THE PUBLIC ARE NOT ELIGIBLE TO TAKE PART IN THE PLACING. THIS ANNOUNCEMENT (INCLUDING THE APPENDIX) AND THE TERMS AND CONDITIONS SET OUT HEREIN ARE FOR INFORMATION PURPOSES ONLY AND ARE DIRECTED ONLY AT: (A) PERSONS IN MEMBER STATES OF THE EUROPEAN ECONOMIC AREA WHO ARE QUALIFIED INVESTORS (AS DEFINED IN ARTICLE 2(1)(E) OF EU DIRECTIVE 2003/71/EC (THE "PROSPECTUS DIRECTIVE")); AND/OR (B) PERSONS IN THE UNITED KINGDOM WHO ARE QUALIFIED INVESTORS AND PERSONS WHO ARE (I) INVESTMENT PROFESSIONALS FALLING WITHIN ARTICLE 19(5) OF THE FINANCIAL SERVICES AND MARKETS ACT 2000 (FINANCIAL PROMOTION) ORDER 2005 (THE "ORDER"); OR (II) PERSONS FALLING WITHIN ARTICLE 49(2)(A) TO (D) ("HIGH NET WORTH COMPANIES, UNINCORPORATED ASSOCIATIONS, ETC") OF THE ORDER; OR (III) PERSONS TO WHOM IT MAY OTHERWISE BE LAWFULLY COMMUNICATED (ALL SUCH PERSONS IN (A) AND (B) TOGETHER BEING REFERRED TO AS "RELEVANT PERSONS"). THIS ANNOUNCEMENT (INCLUDING THE APPENDIX) AND THE TERMS AND CONDITIONS SET OUT HEREIN MUST NOT BE ACTED ON OR RELIED ON BY PERSONS WHO ARE NOT RELEVANT PERSONS. ANY INVESTMENT OR INVESTMENT ACTIVITY TO WHICH THIS ANNOUNCEMENT (INCLUDING THE APPENDIX) AND THE TERMS AND CONDITIONS SET OUT HEREIN RELATE IS AVAILABLE ONLY TO RELEVANT PERSONS AND WILL BE ENGAGED IN ONLY WITH RELEVANT PERSONS. THIS ANNOUNCEMENT (INCLUDING THE APPENDIX) DOES NOT ITSELF CONSTITUTE AN OFFER FOR SALE OR SUBSCRIPTION OF ANY SECURITIES IN TULLOW OIL.
Persons (including individuals, funds or otherwise) by whom or on whose behalf a commitment to acquire Placing Shares has been given ("Placees") will be deemed to have read and understood this announcement, including the Appendix, in its entirety and to be making such offer on the terms and conditions, and to be providing the representations, warranties, acknowledgements, and undertakings contained in the Appendix. In particular, each such Placee represents, warrants and acknowledges that it is: (i) a Relevant Person (as defined above) and undertakes that it will acquire, hold, manage or dispose of any Placing Shares that are allocated to it for the purposes of its business; and (ii) outside the United States and is subscribing for the Placing Shares in an "offshore transaction" (within the meaning of Regulation S under the United States Securities Act of 1933 (the "Securities Act").
This announcement, including the Appendix, is not for distribution directly or indirectly in or into the United States (including its territories and possessions, any State of the United States and the District of Columbia), Canada, Australia or Japan or any jurisdiction into which the same would be unlawful. This announcement does not constitute or form part of an offer or solicitation to purchase or subscribe for shares in the capital of Tullow Oil in the United States, Canada, Australia or Japan or any jurisdiction in which such an offer or solicitation is unlawful. In particular, the Placing Shares referred to in this announcement have not been, and will not be, registered under the Securities Act and may not be offered or sold in the United States absent registration or an exemption from the registration requirements under the Securities Act. The Placing Shares referred to in this announcement are being offered and sold outside the United States in accordance with Regulation S under the Securities Act and in the United States to "qualified institutional buyers" in accordance with the exemption from registration under the Securities Act for transactions by an issuer not involving a public offering. No public offering of securities of Tullow Oil will be made in connection with the Placing in the United Kingdom, the United States or elsewhere.
The relevant clearances have not been, and nor will they be, obtained from the securities commission of any province or territory of Canada; no prospectus has been lodged with, or registered by, the Australian Securities and Investments Commission or the Japanese Ministry of Finance; and the Placing Shares have not been, and nor will they be, registered under or offered in compliance with the securities laws of any state, province or territory of Canada, Australia or Japan. Accordingly, the Placing Shares may not (unless an exemption under the relevant securities laws is applicable) be offered, sold, resold or delivered, directly or indirectly, in or into the United States, Canada, Australia or Japan or any other jurisdiction outside the United Kingdom.
The Placing Shares have not been approved or disapproved by the U.S. Securities and Exchange Commission (the "SEC"), any State securities commission or any other regulatory authority in the United States, nor have any of the foregoing authorities passed upon or endorsed the merits of the Placing or the accuracy or adequacy of this announcement. Any representation to the contrary is unlawful. Persons (including, without limitation, nominees and trustees) who have a contractual or other legal obligation to forward a copy of the Appendix or this announcement should seek appropriate advice before taking any action.
The Placing Shares to be issued pursuant to the Placing will not be admitted to trading on any stock exchange other than the London Stock Exchange and the Irish Stock Exchange. Neither the content of Tullow Oil’s website nor any website accessible by hyperlinks on Tullow Oil’s website is incorporated in, or forms part of, this announcement.