Prospex Energy PLC / Index: AIM / Epic: PXEN / Sector: Oil and Gas

7 February 2022

Prospex Energy PLC

('Prospex' or the 'Company')

Conditional Placing and Subscription to raise £2.395 million

and

Notice of General Meeting

Prospex Energy PLC, the AIM quoted investment company focused on European gas and power projects, today announces that it has raised £2.395 million before expenses, through the conditional placing and subscription of 68,428,572 New Ordinary Shares of £0.001 each at a price of 3.5 pence per share, a 16.7 percent discount to the closing share price on 4 February 2022.  The fundraising was oversubscribed and supported by existing and new institutional and retail investors, as well as Directors of the Company and is subject to shareholder approval.

Highlights

·    Proceeds of the fundraising will be used to:

o  Acquire 20% of the Selva Field in Italy, more than doubling the company's current holding from 17% to 37%, estimated to add 2.7 billion cubic feet ("Bcf") of 2P gas reserves to Prospex's portfolio

o  Fund the development costs of the Selva project to first gas expected in Q1 2023

·    Full Director participation in the subscription

·    Existing shareholders who have not had the opportunity to participate in the placing, will be able to do so now at the same placing price through Broker Option Shares via Peterhouse Capital Ltd (contact details below) to raise up to a further £0.24 million

·    Proposed removal of pre-emptive rights over 41.3 percent of the enlarged share capital to allow the Company to capitalise on the fast-moving opportunities within the energy sector and advance its existing portfolio

Commenting on the placing, Mark Routh, CEO of Prospex said:

"This placing has exceeded expectations and we have surpassed the minimum amount we needed for Selva from existing and new investors.  We have had full support from our major shareholders and participation from all Board directors and we have closed the placing without issuing any warrants.  It will provide Prospex with the funds needed to significantly increase our interest in the Selva Field in Italy, fund the development costs of that project to first gas and will enable us to fund other opportunities.

"I am particularly pleased to be offering all existing shareholders the opportunity to participate in this placing via the broker option at the same price as the placees in this subscription.  The broker option will be available to existing shareholders until 16:30 on Tuesday 8 February 2022.

"Any extra funds received via the broker option scheme will allow us to accelerate and advance work on the infill well drilling campaign on the El Romeral concession in Spain currently waiting on permits to drill the first three infill wells.  The first two wells to be drilled on two proven gas-bearing structures are expected to bring the generation utilisation of the plant up to full capacity.

"I would like to take this opportunity to thank existing shareholders for their support and welcome our new shareholders as we look to accelerate growth and increase shareholder value."

For further information visit www.prospex.energy or contact the following:

Background on Conditional Placing and Detail of General Meeting

Use of Proceeds

The net proceeds of the Placing and Subscription, (being approximately £2.32m) together with certain of the Company's existing cash resources and income, will be used to enable the Company to fund the development of its 17% share of the Selva field in Italy and to fund the proposed 20% acquisition of the Selva field in Italy, together with the associated 20% share of the development costs.

In addition, any proceeds raised from the broker option scheme will be used to fund several business development activities, including providing funds to accelerate the planning and execution in Q4 2022 of the first infill well in the Company's El Romeral power project in Southern Spain through its 49.9% shareholding in Tarba Energía ("Tarba").  If the income generated by the El Romeral power project, which is passed onto Tarba shareholders throughout 2022, does not cover the overheads of the Company, then certain of the proceeds may be used for general working capital purposes.

The Placing and Subscription and Broker Option are subject to, inter alia, the receipt of Shareholder approval of the necessary Resolutions to enable the issue of the New Ordinary Shares free of pre-emption rights.  Accordingly, the Company is convening a General Meeting to seek Shareholder approval of relevant authorities to allot shares in the Company and to disapply pre-emption rights.  These authorities will enable the Directors to complete the Placing and Subscription and Broker Option.

Notice of General Meeting

The Company is convening the requisite General Meeting for 10:00 a.m. on 23 February 2022 at the Company's registered office at Shakespeare Martineau LLP, 60 Gracechurch Street, London, EC3V 0HR to approve the necessary resolutions in respect of the Placing and Subscription and Broker Option.  If the Resolutions are not passed, the Placing and Subscription and Broker Option will not proceed.

This announcement explains, inter alia, the background to and reasons for the Placing and Subscription and Broker Option, and why the Directors consider the Placing and Subscription and Broker Option to be in the best interests of the Company and its Shareholders as a whole and recommend that shareholders vote in favour of the Resolutions to be proposed at the General Meeting, notice of which is set out at the end of the circular to be sent to shareholders today.

Details of the Placing

The Placing Price represents a discount of 16.7 percent to the closing middle market price of 4.2 pence per Ordinary Share on 4 February 2022, being the last business day prior to the announcement of the Placing and the Subscription.

The New Ordinary Shares to be issued pursuant to the Placing have been conditionally placed by the Company and by Peterhouse Capital Limited ("Peterhouse") and Novum Securities Limited ("Novum") (together "the Brokers") as agents of the Company, with certain existing and new institutional and other investors pursuant to the Placing Agreement, subject to the passing of Resolutions 1 and 2.

Under the terms of the Placing Agreement, conditional on Admission, Peterhouse and Novum will receive commission from the Company on the funds they introduce.  The Company has given an indemnity and certain customary warranties and undertakings to Peterhouse and Novum in relation, inter alia, to its business and the performance of their duties under the Placing Agreement.

Broker Option Shares

To provide existing shareholders who did not participate in the Placing and Subscription with the opportunity to do so, the Company will also offer "Broker Option Shares" via Peterhouse, subject to the completion of the Placing, representing a number of Ordinary Shares up to 10% of the New Ordinary Shares offered in the proposed Placing and Subscription.  In order to satisfy the demand for Broker Option Shares, the facility may be increased by agreement between the Board and the Brokers.  This is a facility to allow existing shareholders to acquire Ordinary Shares at the Placing Price after the Placing and Subscription have closed.  The Company and the Brokers will prioritise valid orders from existing shareholders.  As far as is practical, participation in the Broker Option Shares will be prioritised for shareholders (direct or indirect) on the register at the close of business on 4 February 2022.

The broker option will be available to existing shareholders until 16:30 on Tuesday 8 February 2022.

The Broker Option Shares will rank pari passu with the Company's Ordinary Shares and the New Ordinary Shares.

The ability of the Company to offer Broker Option Shares is conditional on the passing of the Resolutions.

To subscribe for Broker Option Shares, investors should communicate their bid to Peterhouse via their stockbroker as Peterhouse cannot take direct orders from individual private investors.  Existing Shareholders or other interested parties who wish to register their interest in participating in the Broker Option Shares should instruct their stockbroker to call Peterhouse on STX: 76086 or 020 7469 0938 or 020 7469 0936 or 020 7220 9797.  Each bid should state the number of Broker Option Shares the investor wishes to subscribe for at the Placing Price.

Directors' participation in the Subscription and Related Party Transaction

The following Directors are subscribing for New Ordinary Shares pursuant to the Subscription for an investment, in aggregate, of approximately £0.135 million.  Their subscription for New Ordinary Shares is taking place on the same terms and conditions as the Placing.

Related Party Transaction

The participation in the Subscription by the Directors constitutes a related party transaction under the AIM Rules.  Due to the participation by all of the directors in the Subscription, there is not a director, or directors, independent of the Subscription to provide the necessary AIM Rule 13 related party transaction opinion.  Accordingly, Strand Hanson Limited, the Company's Nominated Adviser, confirms it is satisfied that the terms of the Subscription are fair and reasonable insofar as the Company's shareholders are concerned.

1.    Resolution 1 - Allotment of Ordinary Shares

Resolution 1 (to be proposed as an ordinary resolution): proposes that authority be granted to allot ordinary shares in the capital of the Company up to a maximum nominal amount of one hundred and twenty-five thousand pounds (£125,000) representing an authority to allot approximately 70.5 percent of the Company's issued ordinary share capital as at 4 February 2022 (being the latest practicable date before publication of this document) during the period following the passing of this Resolution until the conclusion of the next Annual General Meeting.

Resolution 1 will be proposed as an ordinary resolution.  This means that for Resolution 1 to be passed, at least 50% of the votes cast must be in favour of the resolution.

2.    Resolution 2 - Disapplication of Statutory Pre-Emption Rights

Resolution 2 (to be proposed as a special resolution): to dis-apply the pre-emption rights pursuant to the provisions of section 570 of the Act in respect of the allotment of shares up to a maximum nominal value of one hundred and twenty-five thousand pounds (£125,000), representing an authority to allot approximately 70.5 percent of the issued ordinary share capital of the Company as at 4 February 2022 (the latest practicable date before publication of this document) and shall expire upon the expiry of the general authority conferred by Resolution 1.

Resolution 2 will be proposed as a special resolution.  This means that for Resolution 2 to be passed, at least 75 % of the votes cast must be in favour of the resolution.

The Board is proposing Resolutions 1 and 2 in order to achieve the Placing and Subscription and Broker Option.  The Placing and Subscription and Broker Option are conditional on the passing of Resolutions 1 and 2.  Accordingly, if Resolution 1 is not passed, the Placing and Subscription and Broker Option will not proceed.

3.    Proposed use of authorities

In addition to fulfilling the Placing and Subscription, together with sufficient headroom to cover the Broker Option Shares, the Company is seeking authority to be able to raise funds, if needed, through the issue of equity without pre-emption to be able to execute transactions, if and when needed, without having to call a further general meeting.

The Board believes that Prospex's current portfolio is a springboard for further growth opportunities.  Organic growth is already happening and corporate acquisitions will also be considered.  Investment and acquisition size will vary according to the available production linked financing and the Company intends to leverage the optimum debt levels, a common practice in the industry, in order to increase returns to shareholders with minimal risk.

The Company is looking at onshore asset divestments in Northwest Europe and elsewhere.  The Company is also talking to debt financiers and others to limit the use of equity and shareholder dilution, but future deals are likely to comprise an element of both debt and equity.  Therefore, the Company proposes to ask shareholders for the ability to raise funds to grow the Company through the issue of shares to finance future deals that are in line with the Company's stated vision and strategy.

The share authorities being granted by Resolutions 1 and 2 will provide the Company with sufficient share authorities to cover its growth opportunities in addition to the Placing and Subscription and any issue of Broker Option Shares.  The authorities will also allow the Company to issue 25 million warrants at 3p per share and 1.92 million warrants at 2.25p share to honour a historic commitment to the brokers and placees in the March 2021 fundraise as announced on 9 March 2021.

4.    Irrevocable undertakings

The top twelve registered shareholders including the eight 'TR-1 holders' as appearing on the 'AIM Rule 26' of the Company's website have given irrevocable undertakings to the Company to vote in favour of the Resolutions to be proposed at the General Meeting (and, where relevant, to procure that such action is taken by the relevant registered holders if that is not one of them) in respect of their beneficial holdings totaling, in aggregate, 100,362,386 Ordinary Shares, representing approximately 56.61 percent of the voting rights of the Existing Ordinary Shares.

Together with the Board directors who hold in aggregate 8,568,724 Ordinary Shares, the total votes in favour of the Resolutions will be approximately 61.41 percent of the voting rights of the Existing Ordinary Shares.

5.    Action to be taken by Shareholders

You will find enclosed with this document a reply-paid form of proxy for use by Shareholders at the General Meeting.  Whether or not you intend to be present at the General Meeting, you are requested to complete this form in accordance with the instructions printed on it as soon as possible.  To be valid, completed forms of proxy must be received by Neville Registrars, by no later than 10.00 a.m. on 18 February 2022.

Completion and return of the Form of Proxy will not preclude you from attending and voting in person at the General Meeting if you so wish.

Shareholders are reminded that the Placing and Subscription is conditional on the passing of Resolutions 1 and 2 to be proposed at the General Meeting.  Should Resolutions 1 and 2 not be passed, the Placing and Subscription and Broker Option will not proceed and the monies in respect of the New Ordinary Shares will be returned to investors.

6.    Recommendation

The Directors consider the passing of Resolutions 1 and 2 and the completion of the Placing and Subscription and Broker Option to be in the best interests of the Company and its Shareholders as a whole.  Accordingly, the Directors unanimously recommend that all Shareholders vote in favour of the Resolutions, as they intend to do, or procure to be done, in respect of their own beneficial shareholdings, being at the Latest Practicable Date, in aggregate, 8,568,724 Ordinary Shares, representing approximately 4.83 percent of the Existing Issued Ordinary Share Capital.

* * ENDS * *

Editor Notes

Prospex Energy PLC is an AIM quoted investment company focussed on high impact onshore and shallow offshore European opportunities with short timelines to production. The Company's strategy is to acquire undervalued projects with multiple, tangible value trigger points that can be realised within 12 months of acquisition and then applying low-cost re-evaluation techniques to identify and de-risk prospects.  The Company's strategy is to rapidly scale up gas production in the short term to generate internal revenues that can then be deployed to develop the asset base and increase production further.

About Selva:

The Podere Gallina Licence is in the Po Valley region of Italy.  The licence contains the currently shut‑in Selva gas-field as well as exciting exploration opportunities.  The Podere Maiar-1 well was completed in December 2017 and successfully found a commercial gas accumulation up-dip of the previous wells on the Selva field.  The well is suspended and is awaiting permissions to connect it to the local gas grid for gas export.  The Company currently has as 17% working interest in the Podere Gallina licence.  The Company announced on 10 August 2021 the conditional acquisition of a further 20% of the Podere Gallina licence from UOG.  Subject to securing funding Prospex is set to increase its working interest to 37% in Q2 2022.

Subject to the award of the Production Concession by the Italian authorities, expected in March 2022, first gas is targeted for Q1 2023.

The Podere Gallina Licence holds independently verified 2P gross reserves of 13.4 Bcf (5.0 Bcf net to Prospex at 37% WI), gross Contingent 2C Resources of 14.1 Bcf (5.2 Bcf net) and a further 91.5 Bcf of gross Best Estimate Prospective Resources (33.9 Bcf net).

(Source: CGG Services (UK) Limited Competent Persons Report - January 2019 https://bit.ly/3nZNfYf).

About El Romeral and Tarba

The El Romeral gas and power project in Spain, with gas production wells supplying gas to an 8.1MW power plant near Carmona in Southern Spain is owned and operated by Tarba.  Prospex owns a 49.9% working interest in the El Romeral project via Tarba.  Tarba sells electricity generated from the plant on the spot market in Spain.  Current spot market prices have reached all-time highs in recent months.

Prospex also owns a 15% working interest in the large scale Tesorillo gas project in southern Spain, which has the potential to hold gross un-risked Prospective Resources of 831 Bcf of gas (Best Estimate), with upside in excess of 2 Tcf.

The Tesorillo permit is temporarily suspended, awaiting Ministry resolution and reinstatement as production licence.  The Tesorillo permit contains the Almarchal-1 gas discovery well (drilled in 1957) which logged 212m of net gas pay.  Multiple drill stem tests flowed gas to surface.

Operated by Tarba (85% Warrego Energy (ASX:WGO) and 15% Prospex).  Prospex has an option to increase to 49.9% for €1,725,000 ahead of drilling a well.

The updated Corporate Presentation for Q1-2022 is available on the Company's website at https://bit.ly/3G6JtCm.