- Title:
Placing to raise £3.5 million - Time:
07:00:07 - Date:
16 Nov 2020 - Category:
Capital structure - ID:
3484F
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16 November 2020
TomCo Energy plc (AIM: TOM), the US operating oil development group focused on using innovative technology to unlock unconventional hydrocarbon resources, announces that:
· it has raised £3,500,000 (gross) by way of a placing (the "Placing") at a price of 0.45 pence; and
· the Company's 50/50 joint venture with Valkor LLC ("Valkor"), Greenfield Energy LLC ("Greenfield"), has entered into a multi-site licence with Petroteq Energy Inc ("Petroteq") for the use of its closed loop system for use in the recovery of oil from oil sands (the "Oil Sands Technology") (the "Petroteq Licence" or "Licence").
The Placing
The Company has raised £3,500,000 (gross) by way of a placing (the "Placing") of 777,777,777 new ordinary shares of no par value in the Company ("Ordinary Shares") (the "Placing Shares") at a price of 0.45 pence per Placing Share (the "Placing Price") through Novum Securities Limited ("NSL"), the Company's broker. The number of Placing Shares to be issued represents approximately 115.5% of the Company's current issued share capital.
Every two Placing Shares have one warrant attached, resulting in the issue of 388,888,888 warrants, with each warrant having the right to acquire one new Ordinary Share at an exercise price of 0.9 pence for a period of two years from the date of the admission of the Placing Shares (the "Warrants"). If the Warrants are exercised in full, this would result in the issue of 388,888,888 new Ordinary Shares raising a further £3,500,000 for the development of the Company's business, and which would represent approximately 26.8% of the Company's issued share capital as enlarged by the Placing.
The Company has also issued, in aggregate, 46,666,666 warrants to NSL, giving them the right to acquire such number of new Ordinary Shares at an exercise price of 0.45 pence for a period of two years from the date of admission of the Placing Shares.
NSL has entered into an agreement with TomCo (the "Placing Agreement") under which, subject to the conditions set out therein, NSL has been instructed by TomCo to use their reasonable endeavours to procure subscribers for the Placing Shares. The Placing Agreement includes customary provisions including that the Placing Agreement can be terminated, inter alia, if (i) there is a breach of any material warranty, or any of the other obligations on the Company which is material in the context of the Placing, and (ii) on any matter occurring or being likely to occur which, in the opinion of NSL, is (or will be if it occurs) likely to materially and prejudicially affect the financial position or the business or prospects of the Company or otherwise makes it impractical or inadvisable to proceed with the Placing.
Background to the Placing and update on the POSP
The Placing has primarily been undertaken to further progress the future plans of the Company's 50/50 joint venture with Valkor LLC ("Valkor"), Greenfield Energy LLC ("Greenfield").
As announced on 16 September 2020, the board of TomCo (the "Board") believes that the Pre-FEED (Front-End Engineering and Design) Report prepared by Crosstrails Engineering LLC, a subsidiary of Valkor, provides a high level of confidence that the processes being utilised at Petroteq's existing oil sands plant at Asphalt Ridge, Utah (the "POSP") can be scaled up to enable commercial production of 10,000 barrels of oil per day ("bopd") from a single site. Proof of commerciality though is subject, inter alia, to the successful completion of the proposed upgrade works to the POSP, that are currently being completed ahead of its restart, and the associated trials to demonstrate the commerciality of the processes used in the Oil Sands Technology and the identification and securing of a suitable site for a commercial scale plant (further details of which are set out below).
The work being undertaken by Greenfield pursuant to a work order originally between Valkor and Petroteq that has been assigned to Greenfield, under which Greenfield has taken over the management and operations of the POSP (the "Work Order"), to upgrade the capacity and improve the reliability of the POSP is progressing as planned, with the restart of the plant expected in the week beginning 30 November 2020. Once the POSP has been restarted, Greenfield then intends on seeking to undertake a series of associated tests and trials, to be verified by an independent third party, to demonstrate both the commerciality of the processes used in the Oil Sands Technology and proposed design for the commercial scale plant, thereby enabling Greenfield to move forward with the final FEED report.
In addition, as announced on 18 August 2020, following the restart of the POSP, Greenfield will be working with Quadrise, regarding a trial of Quadrise's MSAR® technology at the POSP. This will initially comprise the supply of oil samples produced by the POSP to Quadrise to enable them to undertake test work in the UK to finalise the required MSAR® formulations, before the planned on-site demonstration trial to produce some 600 barrels (100 tonnes) of MSAR® that is intended to be undertaken during Q1 2021.
The Petroteq Licence
In order to provide Greenfield with access to Petroteq's Oil Sands Technology and to enable it to be utilised in future commercial scale oil sands plants to be developed by Greenfield, Greenfield has entered into a new non-exclusive multi-site licence with Petroteq. The Petroteq Licence has been granted in consideration for the funding that Greenfield has provided to date in respect of the upgrades to the POSP, being US$1.5 million, and a further US$0.5 million to be invested by Greenfield into the POSP.
This is an important step for Greenfield as it allows Greenfield to use Petroteq's Oil Sands Technology, which includes Petroteq's processes for the recovery of oil from oil sands, patents, other intellectual property and know-how, in any future oil sands plants to be built by Greenfield in the United States. The Petroteq Licence also clarifies the ownership of any IP developed as a result of the POSP upgrade and associated trials or otherwise developed by Greenfield in the future. Any such IP will be the property of Petroteq and pursuant to the Licence, Petroteq will grant Greenfield the ability to utilise such IP, together with any additional IP developed by Petroteq, in accordance with the terms of the Licence.
For any future oil sands plants built by Greenfield utilising the Petroteq Licence, a 5% royalty of net revenues received from oil products produced from oil sand resources at any oil sands plants will be payable by Greenfield to Petroteq.
The Board believes that a combination of the Petroteq Licence and know how being developed by Greenfield through the POSP upgrades and associated trials, will allow Greenfield to develop its own commercial scale oil sands plant, subject to securing a suitable location and funding.
Pursuant to the terms of the Licence, Greenfield is required to engage Valkor as the sole and exclusive provider of engineering, planning and construction services for all oil sand plants to be built by or under the direction of on behalf of Greenfield under the Licence.
Use of Proceeds
In order to facilitate the Company's future plans for Greenfield, which assumes successful POSP trials and the completion of the FEED study, the net proceeds of the Placing of approximately £3.2 million will be specifically utilised as follows:
· US$0.5 million (approximately £0.4 million) will be loaned by the Company to Greenfield (the "Loan"), which together with the US$1.5 million already provided by the Company to Greenfield to upgrade the POSP, which as set out above, secures the new Petroteq Licence. Under the terms of the Petroteq Licence, the US$0.5 million will be invested by Greenfield into the POSP in order to satisfy the full consideration for the Petroteq Licence. The Loan will be unsecured and has an interest rate of 6% per annum payable at the same time as the principal of the Loan is repaid. The Loan is repayable on the second anniversary of the date of advance or earlier with the consent of both Valkor and TomCo or immediately on an insolvency event of Greenfield;
· Approximately £1.3 million will be utilised for the Group's general working capital purposes over the next 12 months and beyond and, if required, providing further funding to Greenfield; and
· Approximately £1.5 million will be retained by the Company with the intention that it is used, inter alia, to facilitate the securing of a site by Greenfield for the first proposed commercial 10,000 bopd plant using Petroteq's Oil Sands Technology pursuant to the Petroteq Licence. Once a suitable site has been identified, the Company intends on providing a loan to Greenfield, which will be on the same terms as the Loan, which will be used to secure the site.
Whilst there is no certainty that it can be secured, a potential site in Uintah County, Utah, USA, has been identified by Greenfield that the Board believes has a number of key attributes that make it attractive. These attributes include, inter alia, the required infrastructure to enable construction to commence quickly, the required permits, and the land containing appropriate resources. Further announcements will be made in this regard as appropriate.
Whilst the Board is confident that the upgrades to the POSP and the associated trails and tests will demonstrate both the commerciality of the processes used in the Oil Sands Technology and that the proposed design for the commercial scale plant is suitable to the recovery of oil from oil sands, in the event that the outcome of the trials and tests are not as expected resulting in the Company choosing not to proceed with the securing of a site, the Company will consider its options with regards to the use of the funds raised through the Placing for that purpose and/or whether to continue to provide funding to Greenfield.
Admission
The Placing Shares will rank pari passu with the existing Ordinary Shares and application will be made for the Placing Shares to be admitted to trading on AIM ("Admission"). It is expected that Admission will become effective and dealings in the 777,777,777 Placing Shares will commence at 8.00 a.m. on 30 November 2020.
Following Admission, the Company's issued share capital will consist of 1,451,412,012 Ordinary Shares with voting rights. There are no Ordinary Shares held in treasury. The figure of 1,451,412,012 may be used by shareholders, following Admission, as the denominator for the calculations by which they will determine if they are required to notify their interest in, or a change to their interest in, the share capital of the Company under the Financial Conduct Authority's Disclosure Guidance and Transparency Rules.
Commenting, John Potter, CEO of TomCo, said: "I am delighted that we have secured funding that, together with the multi-site licence, will enable Greenfield to move to the next stage of development.
"We are confident that the upgrades to the POSP and the associated trials will demonstrate that the processes used at the POSP can be scaled to a commercial level and will allow Greenfield to move forward with finalising the FEED study.
"In addition, I am delighted that we have secured a multi-site licence with Petroteq for the use of its Oil Sands Technology. Coupled with obtaining funding to facilitate the securing of a site for a future plant in the Uintah Basin, I believe TomCo is now very well positioned.
"We look forward to the restart of the POSP and reporting on further progress in due course."
TomCo Energy plc
Malcolm Groat (Chairman) / John Potter (CEO) +44 (0)20 3823 3635
James Harris / Richard Tulloch / Jack Botros +44 (0)20 7409 3494
Charlie Brook-Partridge +44 (0)20 7399 9402
Tim Metcalfe / Graham Herring +44 (0)20 3934 6630
For further information, please visit www.tomcoenergy.com.
Placing to raise £3.5 million07:00:0716 Nov 2020Capital structure3484F