Genesis to Buy 50% Stake in JV from PGS

Genesis has entered into two significant agreements, which will optimise the structure of the Genesis group and simultaneously provide further capital for growth and aggressive exploration activity entering into 2008 and beyond.

In May 2006, Genesis, together with Petroleum Geo-Services formed a joint venture, Genesis Petroleum Europe, which is 50% owned by each party, to explore for oil and gas with a focus on North West Europe. Since its formation, Genesis Europe has been awarded an interest in one UK exploration license and, following the award of pre-qualification status for license applications on the Norwegian Continental Shelf to its Norwegian subsidiary, has been awarded interests in two licenses, offshore Norway.

In April 2007, PGS and Aker Capital AS became substantial shareholders in Genesis through a fundraising exercise with the Company (and are classed as Related Parties under the AIM rules). Following this, the Board of Genesis has decided that it is in the best interests of the Company and shareholders to simplify PGS's position in the group structure and ensure transparency of ownership.

Genesis has therefore agreed to acquire the 50% interest held by PGS in the joint venture between the two companies for a consideration of 6.25 million to be satisfied by the issue of 22.7 million new ordinary shares at 25 pence per share in Genesis, and a 575,000 loan note convertible into 2.3 million shares at the same price. The loan note is unsecured and non-interest bearing. Umoe Invest AS, a Norwegian investment company who maintain a holding in Genesis, is currently regarded by the Panel on Takeovers and Mergers, as acting in concert with PGS as a result of the Chairman of PGS being a principal of Umoe, and this transaction is structured so that the aggregated holdings of PGS and Umoe will not (excluding the conversion of the loan notes) exceed 29.9% of Genesis's issued share capital. This transaction is classed as a Substantial Transaction under the AIM rules.

Following completion of the transaction Genesis will therefore acquire an additional 50 per cent working interest in UK Block 16/8c, which contains an oil discovery, an additional 10% working interest in Norwegian Blocks 34/8, 9 & 11, which contain a gas discovery and an additional 12.5% working interest in Norwegian Block 33/12. In addition the Company will obtain significantly expanded licensing rights to PGS seismic data (worth up to US $30 million). The pre-qualification status of Genesis Europe's subsidiary, for Norwegian license applications, is not affected by the transaction.

In parallel with the acquisition, Genesis will raise additional funds by issuing new equity to institutional investors in a private placing for cash. The Company will issue approximately 41.7 million new shares at a subscription price of 25 pence per share. Aker will subscribe for 15.7 million new shares and will underwrite the remainder of the new issue in full. As consideration for the underwriting, Aker will receive warrants for 9.3 million shares exercisable at 40 pence for 2 years. A total of approximately 10.43 million, before expenses, will be raised to provide additional working capital for the Company, including exploration-drilling expenditure. Following the Placing, Genesis will have approximately 20 million of working capital available and intends to participate in several wells during 2008, the first expected around midyear. Carnegie ASA is managing the Placing, which is expected to close on or around December 19, 2007.

Aker and PGS each currently hold 25 million ordinary shares with each holding representing 24.4% of the Company's issued share capital and each has Board representation. These transactions are, therefore, considered related party transactions under the AIM Rules. The Directors, excluding the representatives of PGS and Aker, having consulted with Jefferies International Limited, the Company's Nominated Adviser, consider that the terms of these transactions are fair and reasonable insofar as its shareholders are concerned. Following completion of the transactions, which are inter-conditional, assuming there is no call on the underwriting, no exercise of the warrants and no conversion of the loan note, PGS will own 28.56%, Aker 24.37% and Umoe 1.38% of the Company's issued share capital which will comprise 167 million shares.

Gerry Harrison, Chairman and Chief Executive of Genesis commented:

"We have developed an excellent relationship with Aker and PGS and their continued support, financially and strategically, is very welcome.

We have developed excellent exploration prospects, plan to drill in 2008 and have the potential to discover both oil and gas.

As a result, we are optimizing our structure to maximise value creation for Genesis shareholders and raise new capital for the drilling programs in a share issue that is fully underwritten by Aker. Our unique position with seismic data access is improved through the new agreement with PGS.

We appreciate the continued support of our current shareholders and look forward to meeting new institutional shareholders who wish to share in our plans for success."


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