Cambrian Acquires Elko Energy Warrants

Cambrian Oil and Gas has purchased 15,000,000 special warrants of Elko Energy from Cambrian Mining. The Company previously owned 2,500,000 special warrants of Elko and the enlarged holding represents 29% (fully diluted) of the issued capital of Elko. Each special warrant converts into 1 common share in the capital of Elko at any time for no further consideration and if they have not been converted by 4 November 2006 then they shall be deemed to have been converted into common shares in the capital of Elko at that date.

COIL is purchasing the special warrants for a total cash consideration of 1,544,993.

Elko, an oil and gas exploration company, has been awarded a 5,400 square kilometer exploration and production license in the Danish North Sea Sector, which it holds with an 80% interest. The remaining 20% is held by the Danish State, which has a direct interest with a full working interest. Elko is an approved offshore operator and has set up a Danish subsidiary to carry out the required work programme. Phase I of the technical studies has been completed, confirming the substantial reserves potential of the license area. Following further ongoing technical work it is planned to farm down Elko's interest during 2007 in exchange for future seismic and drilling obligations being paid for by a new partner.

In December 2005, Elko made a strategic investment of $2.3 million Canadian, and currently owns approximately 40% of Dragon Energy Inc., a private Canadian company with a significant development project in Gansu Province, China ("Dragon"). Dragon has signed a Joint Venture Agreement with a provincial subsidiary of CNPC of China, the 10th largest oil company worldwide, providing for the re-development of the Maling Oilfield in Gansu Province, China.

In the future Elko will focus on regions where its management has excellent technical and commercial knowledge based on previous work experience, as well as having relevant business contacts. These regions comprise the Baltic region, northwest Europe, north Africa and the Middle East. Specific licensing activities are presently underway throughout the core area with the exception of the Middle East. With 32 blocks under evaluation, Elko is the largest license holder and operator of oil and gas licenses in Denmark.

Elko is a private company and made a loss of CAD$172,000 in the 6 months to 30 June 2006. Rudolf Kleiber is the founder and the CEO of Elko. Mr. Kleiber is a German national with more than 27 years international oil industry experience, having worked with Shell in Holland and Egypt and with Phillips Petroleum as Vice President Middle East - Africa. He is a geologist with an MBA from Boston University. His experience includes coordinating work on licensing rounds in Norway, the successful negotiation of several licenses in the Middle East for Phillips, exploration and business development activities throughout Europe (including Norway and Denmark), the Middle East and Africa, and the supervision of 52 onshore fields in Nigeria. Mr Kleiber is also a director of Dragon.

As at the date of this announcement, Cambrian has a 54 per cent. holding in Xtract Energy Plc, which in turn owns 28.21 per cent. of the current issued share capital of the Company and Cambrian is therefore defined as a related party under the AIM Rules. The purchase of the special warrants by COIL represents, under the AIM Rules of London Stock Exchange plc, a related party transaction. The Directors of the Company, other than John Byrne (who is a director of Cambrian), consider, having consulted with its nominated adviser, that the terms of the purchase are fair and reasonable insofar as the shareholders of COIL are concerned.

Placing of New Ordinary Shares

The Company also announces that it intends to conditionally place up to 151.8 million new ordinary shares of 1 pence each at 3 pence per ordinary share through its broker W.H. Ireland Limited, raising 4.55 million gross of expenses. The Placing Shares are to be issued together with one warrant for each Placing Share subscribed, each warrant entitling the holder to subscribe for one ordinary share in the Company at 3 pence per ordinary share. Each Warrant granted shall be exercisable in whole or in part at any time up to 12 months from the date of admission of the Placing Shares to trading on AIM becoming effective in accordance with the AIM Rules. The Warrants will not be admitted to trading on AIM. As at the date of this announcement the Company has 158,227,159 Ordinary Shares in issue. Assuming the Placing is fully subscribed there will be 309,993,821 Ordinary Shares in the Company in issue following completion of the Placing.

As at the date of this announcement, Xtract holds 44,630,769 ordinary shares in the Company, representing 28.21 per cent. of the current issued share capital, and is therefore defined as a related party under the AIM Rules. As part of the Placing, Xtract is intending to subscribe for 65,000,000 new ordinary shares, giving it an aggregate holding of 35.37 per cent. of the Company assuming the Placing is fully subscribed. This intended subscription by Xtract represents, under the AIM Rules, a related party transaction. The Directors of the Company consider, having consulted with its nominated adviser, that the terms of the subscription are fair and reasonable insofar as its shareholders are concerned.

As part of the Placing, Cambrian is intending to subscribe for 53,333,333 new ordinary shares, resulting in a total interest in the Company of 17.20 per cent assuming the Placing is fully subscribed. This intended subscription by Cambrian represents, under the AIM Rules, a related party transaction. The Directors of the Company, other than John Byrne (who is a director of Cambrian), consider, having consulted with its nominated adviser, that the terms of the subscription are fair and reasonable insofar as its shareholders are concerned.

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