IOG – Placing, Subscription and Proposed Open Offer

IOG is pleased to announce that it has conditionally placed 165,795,050 new ordinary shares of £0.01 each in the capital of the Company (the “Ordinary Shares”) by way of a placing (the “Placing”) at a price of 10 pence per Ordinary Share (the “Issue Price”) to raise gross proceeds of approximately £16.6 million.

In addition, IOG is pleased to announce:

·      the proposed issue of 2,750,000 new Ordinary Shares by way of a subscription (the “Subscription”) at the Issue Price by certain Directors and key executives to raise £0.275 million;

·      that it intends to launch an open offer to Shareholders to raise approximately £2 million (the “Open Offer”) through the issue of approximately 20,000,000 new Ordinary Shares, also at the Issue Price;

(the Placing, the Subscription and the Open Offer together, the “Fundraising”).

Peel Hunt LLP (“Peel Hunt”), FirstEnergy Capital LLP (“GMP FirstEnergy”) and finnCap Ltd (“finnCap”) acted as Joint Bookrunners in connection with the Placing.

The Fundraising will be conditional upon, inter alia, the approval of Shareholders at a general meeting of the Company (the “General Meeting”) that will take place on or around 23 April 2019 and the Admission of the relevant New Ordinary Shares to trading on AIM. The Placing is not conditional upon either the Subscription or the Open Offer.

Concurrent with and inter-conditional on the Placing, the Company is proposing to restructure its existing arrangements with London Oil & Gas Limited (in administration) (“LOG”), through:

·      the rescheduling by 12 months of £7.1 million of debt service due to LOG over the course of 2019 pursuant to the LOG Debt;

·      the conversion of £1.64 million in interest due from LOG’s existing convertible debt into new Ordinary Shares; (“Debt Conversion”);

·      a 12 month maturity extension of the existing warrants to subscribe for 7,500,000 Ordinary Shares at a strike price of 8 pence per Ordinary Share and 5,777,310 Ordinary Shares at a strike price of 11.9 pence per Ordinary Share which were granted by the Company to LOG in 2015 as part of the provision of certain loans to the Company by LOG and which comprise part of the warrants to subscribe for Ordinary Shares granted to LOG as part of the LOG Debt (“LOG 2015 Warrants”).

The arrangements entered into with LOG will be conditional upon, inter alia, the approval of Shareholders at the General Meeting and are interconditional with the completion of the Placing.

The Company is currently in an offer period under the Takeover Code and, for as long as the Company remains in an offer period, Shareholders will also be required to approve the Fundraising and certain aspects of the restructuring of the LOG arrangements for the purposes of Rule 21.1 of the Takeover Code. The Circular will therefore also include information to satisfy the requirements of Note 1 on Rule 21.1 of the Takeover Code, if appropriate.

Highlights:

·                Approximately £16.6 million has been conditionally raised by way of the Placing at a price of 10 pence per Ordinary Share.

·                Intention of certain Directors and key executives to subscribe for £0.275 million to be raised by way of the Subscription at a price of 10 pence per Ordinary Share.

·                Approximately £2 million to be raised by way of an Open Offer, also at a price of 10 pence per Ordinary Share. The Open Offer will be available to holders of Existing Ordinary Shares on the Company’s register of members on 29 March 2019, being the Record Date (other than Overseas Shareholders who are located in or citizens of, or have a registered address in certain overseas jurisdictions (including without limitation, any Excluded Territory).

·                The Issue Price of 10 pence per Ordinary Share represents a discount of 29.2 per cent. to the Closing Price of 14.125 pence per Ordinary Share on 4 March 2019, being the day before RockRose Energy PLC announced a possible offer for the Company and a discount of 41.6 per cent. to the Closing Price of 17.125 pence per Ordinary Share on 29 March 2019, being the last practicable date prior to this announcement.

·                The primary use of the proceeds pursuant to the Placing will be to allow the Company to drill its appraisal well at Harvey, expected to spud in mid-2019, at a total remaining cost of approximately £9.6 million.

·                In addition, approximately £2.5 million of the proceeds of the Placing will be used to fund continued work on a field development plan for the Goddard gas field.

·                The remaining proceeds of the Placing and any proceeds of the Open Offer and the Subscription will be used to fund the Company’s working capital requirements to the end of 2019 and ongoing project management costs. This will allow it to continue to progress its ongoing farm-out discussions, enabling it to decide in 1H 2019 between industrial or capital markets funding to FID, which will ensure the development of its SNS portfolio.

·                In conjunction with the Fundraising, the Company has agreed to restructure its arrangements with LOG which include: (i) the Debt Conversion; (ii) the extension of £7.1 million of 2019 maturities pursuant to its loan agreements with LOG by 12 months; (iii) the extension of the maturity of 13,277,310 warrants held by LOG from 31 December 2019 to 31 December 2020; and (iv) the implementation of a shareholder relationship agreement between IOG and LOG, to regulate their commercial relations on an arms-length basis.

·                A circular convening the General Meeting and setting out further details of the Fundraising, the arrangements being entered into with LOG and the terms and conditions of the Open Offer (the “Circular”) is expected to be published on the Company’s website and posted to Shareholders on or about 3 April 2019.

The Placing will comprise a placing of 165,795,050 new Ordinary Shares, which have been placed firm with Placees.

The New Ordinary Shares, when issued, will be credited as fully paid and will rank pari passu in all respects with the Existing Ordinary Shares, including the right to receive all dividends and other distributions declared, made or paid on or in respect of such shares after the date of issue.

Capitalised terms used in this announcement shall have the meaning ascribed to them in the Definitions section at the end of this announcement, unless the context otherwise requires.

Andrew Hockey, CEO of IOG commented:

“The institutional Placing, Subscription and Open Offer announced today are a vital step in progressing our plans to become a substantial UK gas producer, delivering excellent returns by unlocking the exceptional value in our portfolio. After a challenging period, this funding and associated debt restructuring ensures that the Company is firmly on track to advance into an exciting new phase and execute our strategy on behalf of our long-term shareholders and new institutional investors. We will now have the time and financial strength to deliver on our two key catalysts to value over the coming months.

“First, delivering the development funding for our high-return Core Project through the well-progressed farm-out process or via the capital markets. The project’s technical readiness has given us an excellent opportunity to engage with well-funded potential partners on attractive terms. We look forward to selecting our preferred party in 1H 2019 in a transaction which we expect substantially to cover our project funding needs, as well as providing important further industrial validation. We have the right team with the right experience to deliver both the development funding and the project itself, which will generate very substantial cashflow.

“Second, drilling the high-impact appraisal well at Harvey which could significantly enhance the project’s value and returns. Upon shareholder approval we will be fully funded to deliver this major catalyst as soon as possible, as well as the submission of the Field Development Plan for Goddard, which is another key step in strengthening core value.

“The Subscription by the Company’s Board and executive demonstrates our firm belief that these plans will deliver the best value for shareholders. The Open Offer also rightly gives our existing shareholders the opportunity to participate on the same terms.”