Energo to Acquire Stake in Carpathian

Energo Holdings Corp. has agreed to acquire 23,287,543 ordinary fully paid shares in the capital of Carpathian Resources Limited for 7 cents (approximately 2.9 pence) per share.

Completion of the acquisition (which is unconditional) is due to occur on 20 April 2007, after which Energo will own 17.33% of the issued share capital of Carpathian.

Energo has also agreed, subject to shareholder approval, to subscribe for 50 million ordinary fully paid shares of no par value at 6.5 cents (approximately 2.7 pence) per share, representing an additional A$3.25 million (approximately 1.355 million) of new capital for Carpathian - after which Energo would own 39.74% of the issued share capital of Carpathian.

Carpathian plans to use this additional capital to implement a new growth strategy by acquiring interests in other European and former Soviet Union oil and gas fields and by investing further in the existing asset portfolio of the company.

The 23,287,543 existing shares will be acquired from Elcos (Qld) Pty Ltd, Barchester Pty Ltd, Burnal Pty Ltd and Royal Sunset Pty Ltd being companies controlled by Mr Eddie Smith (a director of Carpathian), Persal and Co Investments Pty Ltd and Redbrook Nominees Pty Ltd (together the 'Vendors').

Energo is a special purpose company established to represent a consortium of European and Russian investors wishing to implement a new growth strategy for the Company. Energo will thoroughly evaluate Carpathian's assets and investigate funding the most prospective assets and intends to expand the asset portfolio by acquiring new projects.

Mr Maximiliaan Danishevski, has been appointed to the board of Carpathian as Executive Chairman. Currently, Mr. Danishevski is CEO of BSGE Mediterranean, a joint cooperation with Gazprom, one of the world's largest energy companies, for the supply and distribution of gas to Cyprus and Israel known as Blue Stream II. Within this framework of activities, he is also a member of the Gazprom Export / BSGE Mediterranean Steering Committee. Gazprom Export is the exclusive gas export arm of Gazprom.

Following the sale of 9,885,156 ordinary shares at 7 cents (approximately 2.9 pence) for a total consideration of A$691,960 (approximately 288,597) by entities controlled by Mr Smith, Mr Smith's interested holding will be 10,979,440 ordinary shares or 8.17% of the issued share capital of Carpathian.

Following the sale of 9,259,373 ordinary shares at 7 cents (approximately 2.9 pence) for a total consideration of A$648,156 (approximately 270,719) by Persal and Co Investments Pty Ltd, Persal and Co Investments Pty Ltd's will not have any residual shareholding in the issued share capital of Carpathian.

Following the sale of 4,143,014 ordinary shares at 7 cents (approximately 2.9 pence) for a total consideration of A$290,010 (approximately 121,130) by Redbrook Nominees Pty Ltd, Redbrook Nominees Pty Ltd's interested holding will be 1,000,000 ordinary shares or 0.74% of the issued share capital of Carpathian.

Details of the Agreements

A number of agreements have been entered into under which:

  • The Vendors have agreed to sell to Energo 23,287,543 fully paid ordinary shares in the capital of Carpathian for consideration of 7 cents per share (approximately 2.9 pence);
  • Energo has also agreed, subject to shareholder approval and the execution of a subscription agreement on terms reasonably acceptable to Carpathian, to subscribe for 50,000,000 ordinary fully paid shares in the capital of the company at 6.5 cents (approximately 2.7 pence) per share. These funds are to be placed in a third party trust account and released subject to shareholder approval of the subscription;
  • Elcos Pty Ltd and Persal and Co Investments Pty Ltd agreed to assign the benefit of Carpathian's A$1,000,000 (approximately 415,000) 10% interest secured convertible notes ('Notes') to Energo in consideration for the face value of the Notes and accrued interest. Energo will be assigned the benefit of the fixed and floating charges over the assets of Carpathian. The conversion of the Notes by Energo into ordinary shares will be subject to shareholder approval;
  • Messrs Smith, Priest and Linsley will stand down from the Board of Carpathian effective immediately on completion. The company will pay to Messrs Smith, Priest and Linsley the sum equivalent to the three month notice period under each of the relevant service agreements. Mr Linsley will be retained by the company in the capacity of a consultant providing technical services to the company;
  • Three new directors have been appointed to the board of Carpathian, namely Mr Maximiliaan Danishevski, as a nominee of Energo, and two new independent directors Messrs Anthony Hawkshaw and Robert Downey. Mr Doug Jendry will remain on the Board; and
  • Mr Smith has agreed to enter into a management agreement with Carpathian pursuant to which Mr Smith, subject to the overview of the board, will continue to liaise with the company's solicitors and manage the legal proceedings in relation to the lawsuit initiated by Geological and Corporate Management Pty Ltd in May 2004.

As the subscription for the 50,000,000 ordinary shares and the conversion of the Notes by Energo, in addition to the 23,287,543 ordinary shares purchased from the Vendors, will result in Energo increasing its voting power above 20%, a general meeting will be held to consider resolutions pursuant to item 7 of section 611 of the Corporations Act and Listing Rule 7.1 of the Listing Rules of Australia Stock Exchange Limited approving the subscription of shares and the conversion of the Notes. A notice of meeting will be sent to shareholders as soon as is practicable.

Change in Board of Directors

For clarification, with immediate effect the board of Carpathian is:

  • Mr Maximiliaan Danishevski - Executive Chairman
  • Mr Anthony Hawkshaw - Executive Director
  • Mr Robert Downey - Non-Executive Director
  • Mr Doug Jendry - Non-Executive Director

Maximiliaan Henri Danishevski, aged 39, is based in Belgium and has been involved in the European Mediterranean and Russian oil and gas industry for over 15 years. Mr. Danishevski is currently the CEO of BSG Mediterranean, which is working closely with Gazprom to supply and deliver gas to Cyprus and Israel via the Bluestream II extension pipeline project and is a member of the Gazprom Export / BSGE Mediterranean Steering Committee. Mr. Danishevski holds a Bachelor and Masters of Business Administration from the European University, Antwerp.

Anthony (Tony) Grant Hawkshaw, aged 54, is a Chartered Accountant and a member of the Institute of Chartered Accountants of Ontario, with extensive experience in international finance, equity raising and corporate acquisitions. Mr Hawkshaw was CFO of Grove Energy Limited from 2004 to present, Chariot Resources Limited from 2004 to 2006, Pan American Silver Corp. from 1995 to 2003 and CFO and VP of Great Lakes Minerals Inc. prior to 1995.

Robert Hartley Downey, aged 40, has practiced law since 1998, and has been admitted as a Barrister and Solicitor of the Supreme Court of Western Australia and the High Court of Australia. Mr Downey has advised several oil and gas companies in all aspects of oil and gas law in a variety of jurisdictions as well as advised on initial public offerings, company law, equity raisings and acquisitions, with extensive experience with companies listed on the ASX, TSX and AIM markets. Mr Downey was the Company Secretary of Grove Energy Limited from 2004 to present.

The incoming Board would like to thank Messrs Priest, Linsley and Smith for their contribution and stewardship of the company over the past few years and for bringing the Ja3a discovery into production. Mr. Smith remains as a shareholder and consultant to assist in the future development of the company.

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