Texas Oil and Gas Acquires Assets in East Texas

TXO announces the acquisition of a package of onshore US assets in its core business area in the East Texas Oilfield and an agreement for new funding.

TXO has acquired a 100 per cent working interest (and a net revenue interest ranging from 75 to 87.5 per cent) in 85 oil and gas wells in the East Texas Oilfield from Hayden Stiles. The wells are situated on leases close to TXO's existing producing leases and the acquisition brings the number of TXO's wells in the East Texas Oilfield to 286 of which 181 are 100 per cent owned and 105 are 50 per cent owned.

The consideration for the acquisition amounts to $3.4 million ($40,000 per well) and comprises the issue of 10,000,000 shares at 15p per share, an immediate payment of $210,000 in cash, $210,000 in cash deferred for six months, and a further $210,000 in cash deferred for a year.

This is a significant acquisition and the first acquisition that TXO has made from a third party, the previous acquisitions having been made from M-C Production and Drilling, a related party.

In addition, as part of the consideration, Hayden Stiles will be granted warrants to subscribe for 750,000 Ordinary Shares at 15 pence per share. These warrants will be exercisable at any time up to 22 March 2008.

Following the Acquisition, Hayden Stiles will become a director of the Company and its wholly-owned subsidiary TOGS Energy Inc. and will be interested in 10,000,000 Ordinary Shares representing approximately 11.99 per cent of the Company's issued share capital, as enlarged by the Acquisition.

Hayden Scott Stiles, (age 45) born in ARP, Texas is an oil field contractor specialising in drilling rig manufacturing, repair and general pipeline installation for production of oil and gas delivery for major independent oil companies and refineries. There are no other matters which require disclosure pursuant to paragraph (f) of Schedule 2 of the AIM Rules.

Hayden Stiles has entered into a lock-in agreement with the Company whereby he agrees not to dispose of any of the Ordinary Shares issued to him pursuant to the Acquisition during 2005. Thereafter, Hayden Stiles will be able to sell a maximum of 1,000,000 Ordinary Shares per calendar year until 31 December 2009. There is no limit on how many Ordinary Shares Hayden Stiles may dispose of after this date.

Simultaneously and as part of its funding requirement, the Company has agreed to issue a $3 million secured bond to Dresdner Kleinwort Wasserstein Securities Limited (DKW), repayable on 31 March 2009 at an annual interest rate of 7.5 per cent, payable quarterly. The issue of the bond and the warrants referred to below is subject to a number of conditions precedent, including shareholder approval and the Company providing DKW with sufficient comfort in relation to the Company's ownerships of its oil and gas wells which are to be covered by the security arrangements. If any of the conditions precedent are not satisfied then DKW has the right not to proceed with the issue of the bond and the warrants.

As part of the funding, TXO will also grant to DKW warrants to subscribe for up to 22,000,000 Ordinary Shares. The warrants will be issued in four tranches of 5,500,000 warrants each with respective exercise prices of 15p, 19p, 23p and 27p per share. TXO may require the exercise of these warrants as and when the average of the closing mid prices of the Ordinary Shares is 25 per cent higher than the exercise price for 20 trading days. However, the Company may not require the exercise of more than 6,375,000 warrants in any calendar year. The Company has also agreed to issue 3,500,000 warrants, being 875,000 warrants of each tranche, to Astin Capital Management Limited as part of its fee for procuring DKW to subscribe for the bond.

This deal provides the Company with an immediate opportunity to reduce its interest cost by refinancing existing more expensive debt, and accelerate its growth by providing additional working capital. Furthermore, it potentially provides the Company with access to a total of 5.3 million in equity over the next four years through the exercise of the warrants.

As the Company in recent times has been referred to as "TXO", the Company is proposing to change its name to TXO plc

A circular to shareholders, including a notice of Extraordinary General Meeting, is being posted to Shareholders. The Extraordinary General Meeting will be held at 11.00am on 29 March 2005. Copies of the circular to shareholders are available from Nabarro Wells & Co Limited, Saddlers House, Gutter Lane, London EC2V 6HS until 1 April 2005.

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 Company: Texas Oil and Gasmore info
 - Texas Oil and Gas Acquires Assets in East Texas (Mar 1)
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