ERM Power to Sell West Australian Gas Assets to Empire O&G for $15M
ERM Power Limited (ERM Power) announced Monday that it had entered into an agreed term sheet with Empire Oil & Gas (Empire) to sell its directly held interests in its West Australian gas assets to Empire.
ERM Power has also agreed to participate in a subscription and rights issue to recapitalize Empire. The sale and the recapitalization (the Transactions) are subject to approval from Empire shareholders at a general meeting.
The West Australian assets which form part of the sale are ERM Power’s interests in 8 Exploration Permits in the Perth Basin1 (Permits), including Exploration Permit 389 containing the wells Red Gully-1 and Gingin West-1, developed in 2013 and producing gas and condensate that is contracted to Alcoa and BP respectively, and associated assets.
The total consideration for the sale ($15.26 million or AUD 16.34 million, which may be adjusted subject to Empire’s share price performance) will be funded by vendor finance from ERM Power, repayable by Empire on the earlier of a disposal of the Red Gully processing plant or 24 months from the date of the agreement. As security for the vendor finance, Empire will grant ERM Power a security interest over its assets, including over the Red Gully processing plant.
ERM Power has also agreed to participate in a recapitalization of Empire by a subscription and proposed rights issue up to a value of $7 million (AUD 7.5 million). ERM Power will subscribe for equity in the subscription and proposed rights issue to take its shareholding in Empire from approximately 10 percent up to 19.99 percent (including the interests of ERM Power’s associates).
ERM Power has also agreed to commit to underwrite a portion of the rights issue under certain conditions. The key terms of ERM Power’s participation in the recapitalization and the Transactions generally are appended to this release.
“Successful implementation of the transaction will result in the restructure of ERM Power’s gas assets into a more capital efficient ownership model, allowing ERM Power to focus on its highly successful electricity retailing and generation business,” ERM Power CEO Philip St Baker said.
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