LONDON (Alliance News) - Wessex Exploration PLC Monday announced details of a planned corporate acquisition in order to solve some of its financial woes, signing a Heads of Agreement to acquire Hague and London Oil BV.
The UK-based energy company said it is now planning to acquire Hague and London Oil, which has a near-term potential production asset for further exploration potential, in the Philippines.
Wessex Exploration said that the consideration of the acquisition will be made by the issuance of 241 million shares in the company, or roughly 25% of its enlarged share capital and additional cash resources of USD1 million to be provided to cover the company's contracted drilling obligations.
The company said that as part of the deal Andrew Cochran and Bill Phelps, former directors of Coastal Energy Co, will join its Board from Hague and London Oil.
Hague and London Oil holds a 15% interest in offshore Service Contract SC54A in the Philippines which contains oil discoveries in moderate water depths.
The decision comes a month after the company received a requisition from Milroy Capital Ltd requiring the company to hold a general meeting for the purposes of considering the removal of the current board and its replacement by four proposed new directors. The meeting will take place on May 15.
On Monday, Wessex reiterated that the acquisition deal will only go ahead if its shareholders vote against the proposed restructuring plan and urged shareholders to do so.
The requisition was signed by a Robert Milroy on behalf of Milroy Capital, which is understood to be a Guernsey company wholly owned by Robert Milroy holding 33 million shares in Wessex Exploration, or 4.7% of the company.
In a letter to shareholders explaining the reason for the proposals, Milroy Capital said the value of the company has fallen by over 95% in less than two years, and the current board lacks strong leadership. Without fundamental change, shareholders face a bleak future and a likely further dilution of their investment, the letter said.
It said at the time that the proposed acquisition "would almost certainly constitute a reverse takeover, and result in enormous dilution for all shareholders." However, since Wessex Exploration has confirmed that the Hague and London Oil deal would not constitute a reverse takeover.
In the letter, Milroy proposed, as the four new directors, himself as non-executive Chairman, Alastair Murray as Chief Executive, Robert McAndrew as chief of production and operations, and Ian Burns as an independent non-executive Director and Chairman of the audit committee.
They would replace the current directors, who are Executive Chairman Malcolm Butler, Chief Financial Officer Andrew Yeo, and Iain Patrick, senior independent non-executive Director.
"The deal does not help Wessex have immediate cashflow and we question whether this deal will secure the companies other assets moving forward," Robery Milroy told Alliance News in response to the proposed Wessex acquisition Monday. "We're not looking at getting cashflow from Hague and London Oil in the next year, It could take five years."
"I'm confident on the shareholders vote on Thursday," Milroy said. "I continue to be unhappy with management based on this decision and we need to change the mentality at Wessex."
Wessex Exploration shares fell 18.1% to 0.860 pence, putting it in the top five AIM fallers Monday.