Rex to rescue Lime

Rex International (RII) entered into a subscription agreement with Lime Petroleum Norway (LPN) for about US$11.72 million (NOK 100 million) as capital injection for Lime’s drilling program obligations.

Image from Rex.

Rex will subscribe for 1,000,000 new LPN shares at a nominal value of $11.80 (NOK 100) per share for a total transfer price of $11.72 million (NOK 100 million) as capital injection into LPN. The capital injection is necessary to allow LPN to fulfill the obligations under its drilling program and for general working capital requirements; and shall be satisfied in cash by RII within three business days from the date of the subscription agreement and will be fully funded by internal resources of the group.

LPN is a wholly owned subsidiary of Lime Petroleum Plc, the company’s 65% indirectly held jointly-controlled entity.

The issue price of $11.80 per LPN share was arrived at on a willing seller willing buyer basis, at arm’s length negotiations between the parties, taking into consideration LPN’s unaudited net tangible asset value of about $28.03 million as at 30 June 2015 and its growth potential, given its stakes in 16 licenses in the Norwegian Continental Shelf and its plan to drill at least three more wells in 2015 and 2016.

Rex’s board considers the capital injection to be in the interest of and beneficial to the group as LPN’s assets in Norway, in which the group has a majority interest, have been identified as the group’s main focus going forward. LPN, as a pre-qualified oil company in Norway, which can receive a cash tax refund of 78% of exploration, costs annually, allows the group to actively participate in the mature exploration and production Norwegian Continental Shelf space. The board is of the view that LPN has potential for growth, as it is a license holder of a number of exploration and discovery assets in the Norwegian Continental Shelf, a well-known oil prolific region.

Upon completion of the capital injection, RII will hold 1,000,000 LPN shares, representing approximately 26.18% direct interest in the enlarged issued and paid-up share capital of LPN, with Lime holding the remaining 73.82% direct interest in the enlarged issued and paid-up share capital of LPN. Accordingly, the group’s effective interest in LPN will increase from approximately 65.00% to 74.16% upon completion of the capital injection.