Beacon Energy PLC (AIM:BCE) said it has struck a “transformational, value-enhancing” reverse takeover deal for a portfolio of production, development, appraisal and exploration oil and gas assets located onshore Germany.
A conditional share purchase agreement has been with Tulip Oil Holding BV and Deutsche Rohstoff AG (DRAG) over the purchase of 100% of the shares of Rhein Petroleum GmbH.
Rhein Petroleum has an experienced operating team with a track record of exploration, appraisal, development and production, Beacon said, with the producing assets generating immediate revenue and having a near-term active work programme in place designed to enhance production and cash flow.
The assets have a proven and probable (2P) net reserve base of 3.85mln barrels (mmbbl) and a 2C net contingent resource base of 22.96 mmbbl, located across four core assets, according to an assessment by SGS Nederland and to be included in the competent person's report (CPR) that will form part of the admission document for the reverse takeover.
Beacon said there is a “commercially attractive programme” with the economic results of the CPR describing an NPV10 valuation of €52.8mln from the development and production of the 2P reserve base, assuming capex of €15.7mln for a three-well programme and facilities upgrade and utilising forward oil pricing as at 14 November 2022.
The cash shell noted that Rhein Petroleum has a “strong” health and safety record and a “firm commitment” to environmentally responsible hydrocarbon production.
Beacon said it will seek to carry out a net £6mln fundraising to finance the drilling, completion, tie-back and bringing into production of the Schwarzbach-2 well and ongoing working capital.
The proceeds of production from this well are expected to be used to fund the forward development programme of “onshore, material, high-margin, low-risk and near-term development and appraisal opportunities”, along with a “mix of low, medium and higher risk exploration opportunities” estimated at a prospective 207.83 mmbbl.
For calendar 2021, Rhein Petroleum reported an operating loss of €1.2mln on revenue of €2.9mln, with unaudited total assets of €11.9mln and net liabilities of €12.9mln including €22mln shareholder loan liability.
Beacon’s current interim chief executive Larry Bottomley is becoming CEO, effective immediately.
To complete the reverse takeover, Tulip and DRAG will receive new ordinary shares in Beacon amounting to a collective 33.2% of the enlarged share capital, plus a contingent consideration based on the future production of the Rhein Petroleum assets. Tulip has also expressed its intention to participate in the planned fundraising, which is expected to raise its stake to roughly 36.7%.
A vendor-financed loan of €1.9mln will also be repaid from production and warrants over new ordinary shares with an exercise price of 0p and may only be exercised in the event another existing warrant or option holder in the company exercises existing warrants or options.
In a statement, Beacon chairman Mark Rollins said the deal “has the potential to build a self-funding platform for growth from cash generative producing and development oil assets”, with the board “impressed by the professionalism of the Rhein Petroleum operating team and look forward to working with them in unlocking the potential in the portfolio”.