21/10/2014 - 13:46

Target taps shareholder, raises capital

21/10/2014 - 13:46

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West Perth-based oil and gas explorer Target Energy has tapped its major shareholder Wyllie Group for $3 million through a convertible note issue, and is undertaking an entitlement offer to raise up to $2.9 million.

Target taps shareholder, raises capital
Target's drilling operations in the Permian Basin in Texas.

West Perth-based oil and gas explorer Target Energy has tapped its major shareholder, Wyllie Group, for $3 million through a convertible note issue, and is undertaking an entitlement offer to raise up to $2.9 million.

In a statement, Target said eligible shareholders would be able to subscribe for one new share for every seven shares they already held, at an issue price of 4.5 cents per share.

“Target has secured $1.9 million of firm entitlement and underwriting commitments in relation to the entitlement issue largely from directors and other existing shareholders,” it said.

The proceeds will be used to fund its Fairway project in the Permian Basin in Texas, which it plans to divest next year.

Wyllie Group recently cut direct ties with mining dealmaker Michael Fotios’s investment syndicate, Investmet, a significant backer of junior resources companies and other speculative opportunities.

Target shares closed 6.6 per cent lower at 4.2 cents per share.

 

See full media release below.

 

US‐focused oil and gas producer, Target Energy Limited (“Target”), is pleased to

advise that it has agreed terms with its largest shareholder, Wyllie Group Pty

Ltd, to raise A$3.0m by issuance of secured Convertible Notes (October 2014

Convertible Notes).  

In addition, Target will be undertaking a non‐renounceable pro‐rata entitlement

issue (Entitlement Issue) to raise up to A$2.9m.    Eligible shareholders will be

able to subscribe for 1 new share in Target, for every 7 existing shares they hold

at the Record Date, at an issue price of A$0.045 per share. The issue price

represents a 7% discount to volume weighted average price (VWAP) over the

last 30 days. Target has secured A$1.9m of firm entitlement and underwriting

commitments in relation to the Entitlement Issue largely from directors and

other existing shareholders.  Further details will be announced in due course.

Funds raised will be used predominantly to complete the balance of Target’s

current 10‐well Fairway drilling program. Upon completion of this program, and

as announced on September 12 2014, it is Target’s intention to seek, in

conjunction with the project operator and other partners, to divest its Permian

Basin Fairway project interest in early 2015. At that time, it is the Company’s

intention that noteholders be given the opportunity to either redeem or

convert their notes to enable discharge of the security over the Fairway Project.

Target’s Managing Director, Laurence Roe commented on the successful

raising, “We are delighted our largest shareholder has agreed to provide

additional funding by way of a new convertible note and many others in our

Top 20 have supported us with the rights issue. It clearly shows strong support

for Target’s strategy and belief in the value proposition on offer for

shareholders.

 “To optimise the value realised in the divestment of Fairway, Target believes it

is important to complete the current drilling program, which involves drilling

lease commitment wells. In early 2015 Target and its partners will have drilled

at least 17 wells in the project and aim to be producing around 500boepd net to

Target, with wells drilled in virtually all leases and two thirds of those leases

expected to be fully held by production.

“The Permian Basin remains the strongest US oil and gas merger and acquisition

market with US$8.8bn of deals announced just in the last quarter. Pleasingly,

the 2014 deal metrics have been strong with average transaction value per acre

multiples on Midland Basin deals above US$40,000 per acre which is good news

for Target in the lead up to our planned divestment.  

“The Board will continue to focus on maximising returns to our shareholders.  

We will complete the drilling program planned for the rest of 2014 and into

early 2015 and then test the market with an offer to sell our Fairway interests.  

Following a successful execution of a sale of its Fairway project, it is Target's

intention to return a portion of the proceeds to shareholders. We will keep

shareholders informed of any material developments as we progress.”

ASX Waiver

The Company is pleased to advise that ASX has granted a waiver from ASX

Listing Rule 10.1 to the extent necessary to permit the Company to:  

1.1. Grant security over the Company’s interest in the Fairway Project in favour

of the Wyllie Group Pty Limited (“Wyllie Group”) (or its nominee) (the

“Wyllie Security”) pursuant to appropriate security documents (“Security

Documents”) related to a convertible note agreement (“Convertible Note

Agreement”) under which Wyllie Group will subscribe for 60,000,000 new

convertible notes with a face value of $0.05 per convertible note, to raise

$3,000,000 (“New Convertible Notes”), without obtaining shareholder

approval on the following conditions.  

1.1.1. The Security Documents include a term that if an event of default

occurs and Wyllie Group exercises its rights under the Wyllie

Security, neither Wyllie Group nor any of its associates can acquire

any legal or beneficial interest in an asset of the Company in full or

part satisfaction of the Company's obligations under the

Convertible Note Agreement or the Security Documents, or

otherwise deal with the assets of the Company, without the

Company first having complied with any applicable listing rules,

including listing rule 10.1, other than as required by law or through a receiver, or receiver and manager (or any other person acting on

behalf of Wyllie Group) appointed by Wyllie Group exercising its

power of sale under the Wyllie Security and selling the assets to an

unrelated third party on arm's length commercial terms and

conditions and distributing the cash proceeds to Wyllie Group in

accordance with its legal entitlements.  

1.1.2. A summary of the material terms of the Convertible Note

Agreement and the Security Documents is made in each annual

report of the Company during the term of the Convertible Note

Agreement and the Security Documents.

1.1.3. Any variations to the terms of the Convertible Note Agreement or

Security Documents or the Wyllie Security which is not a minor

change or is inconsistent with the terms of the waiver, must be

subject to shareholder approval.  

1.1.4. The Company must seek to discharge the Wyllie Security when the

New Convertible Notes are converted or repaid in full, or if it is not

discharged, seek shareholder approval for the continuation of the

Wyllie Security for any further period.  

1.1.5. The Company immediately releases to the market an

announcement which sets out the terms of the waiver, and the

Company’s plans with respect to the conversion or repayment of

the New Convertible Notes and the discharge of the Wyllie

Security, including the timeframe within which it expects

conversion or repayment and discharge to occur.  

STANDING BY BUSINESS. TRUSTED BY BUSINESS.

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