Seascape Energy, an E&P company focused on Southeast Asia, is pleased to announce a fundraising by way of a direct subscription by certain Directors, senior management and certain shareholders (the "Subscription"), and an institutional placing (the "Placing") of new Ordinary Shares (together, the "Fundraising") to follow on from the successful conditional farm-out of a 42.5% participating interest in the Block 2A Production Sharing Contract (the "PSC" or "Block 2A") to INPEX CORPORATION ("INPEX") (the "Block 2A farm-out"). The Fundraising raised gross proceeds of £2.0 million (£1.8 million net), through the successful Placing and Subscription of 5,710,810 new Ordinary Shares (the "Fundraising Shares"), in each case at an issue price of 35 pence per new Ordinary Share (the "Issue Price").
Stifel Nicolaus Europe Limited ("Stifel") is acting as Sole Bookrunner to the Company in connection with the Fundraising.
Background to the Fundraising and Use of Proceeds
Following a strategic review of its operations during 2024, the Board and management of Seascape announced on 17 June 2024 the Company's exit from Norway and its focus on building a full-cycle E&P business in Southeast Asia, where the supportive attitude of the host governments towards small-and-medium sized E&P companies offers significant growth opportunities to the Company.
Seascape entered Malaysia in the Malaysian Bid Round 2022 by being awarded operatorship of Block 2A, offshore Sarawak. Block 2A was awarded along with high-quality 3D seismic data at nil cost. Following a further acquisition in December 2023 (the Topaz acquisition), the Company's working interest in Block 2A increased to 52.5%.
Block 2A contains the giant Kertang prospect, which is believed to be one of the largest undrilled structures in Malaysia. The CPR undertaken by ERCE in June 2024 confirmed the giant scale of the Kertang prospect assigning total gross unrisked mean prospective resources of 9.1 TCF as well as 146 mmbbls of NGLs (1.7 billion boe) (approximately 900 BCF as well as 15 mmbbls, on a net basis) (approximately 165 mmboe) across four target horizons.
Seascape commenced a farm-out process to identify the right partner for Block 2A and following intense interest from major global energy companies, announced earlier this morning a farm-out agreement with INPEX, Japan's largest E&P company, in return for a cash and carry consideration on the Company's retained interest (10%) in the PSC. Completion of the farm-out is anticipated at the end Q1 2025.
Under the terms of the Block 2A farm-out, Seascape will receive:
· An uncapped carry for Seascape's retained interest (10%) through the remaining exploration phase including one firm wildcat well and one contingent appraisal well (subject to a commercial discovery);
· US$20 million cash consideration including:
o US$10 million payable in full at completion of the Block 2A farmout (the "Initial Farmout Consideration"); and
o US$10 million contingent cash consideration to be paid following confirmation of a commercial discovery; and
· Reimbursement of certain historic costs associated with the PSC totalling approximately US$0.5 million.
In October 2024, Seascape announced the award at nil cost of a 28% participating interest in a small field asset production sharing contract over the DEWA Complex Cluster (the "DEWA PSC", or "DEWA"), off the coast of Sarawak. The DEWA PSC is comprised of 12 shallow water gas fields and discoveries dating from the 1980s, with approximately 500 BCF GIIP[1] on a gross basis (83 mmboe) that were overlooked by previous operators which had been focused on oil production.
DEWA provides Seascape with an immediate portfolio of gas fields, with net estimated resources of approximately 85-100 BCF (14-17 mmboe)[2], unlocked by new favourable Small Field Asset fiscal terms, with approximately 50% profit for the contractor (increased from approximately 30% prior to the new fiscal terms).
Given the shallow water depths and nearby infrastructure, the partners in the DEWA PSC are targeting a low-cost development plan utilising existing technology, which could support a potential production plateau of up to 100 mmscfd (17 kboped). DEWA has a low-cost initial work commitment of approximately US$0.6 million net to Seascape, to conduct a detailed resource estimate and deliver a Field Development and Abandonment Plan ("FDP") within two years, currently targeting first gas in 2027.
The farm-out of Block 2A marks an important milestone in the transformation of Seascape into a fully funded, Southeast Asian focused E&P business with a combination of firm value in discovered resources on the DEWA PSC and significant upside associated with its retained interest in the world-class Kertang prospect.
Since refocussing its activities on Southeast Asia, the directors have substantially reduced the ongoing costs of the business and the Company previously announced that it has sufficient cash until Q1 2025. Seascape has existing cash of approximately £1 million[3] and costs of approximately £250 thousand per month, including forecasted spend at DEWA and minimal spend on Block 2A prior to completion of the farm-out. While the Initial Farmout Consideration is substantial, the timing of completion is uncertain and the Directors believe that it is appropriate to ensure that the Company has sufficient financing to enable the Company to execute the Block 2A farm-out, progress DEWA towards FDP and pursue further growth opportunities in Malaysia and across Southeast Asia. With the Company's share price having appreciated approximately 204% per cent. since 17 June 2024[4], the Fundraising will be conducted within the Company's existing shareholder authorities, keeping dilution to a minimum, while also introducing several new shareholders into the register with deep knowledge of the oil and gas industry.
Fundraising Highlights
Certain Directors, senior management and certain shareholders of the Company have subscribed for a total of 2,370,121 new Ordinary Shares (the "Subscription Shares"), at the Issue Price, pursuant to the Subscription. In addition, a total of 3,340,689 new Ordinary Shares (the "Placing Shares") have been placed with new and existing institutional investors pursuant to the Placing by Stifel, at the Issue Price.
A total of 5,710,810 new Ordinary Shares will therefore be issued pursuant to the Fundraising. The Fundraising Shares represent in aggregate 10 per cent. of the Company's existing Ordinary Shares. The Issue Price represents a discount of approximately 4.1 per cent. to the closing mid-market price of 36.5 pence on 29 November 2024 (being the latest practicable date prior to the date of this Announcement).
The Fundraising Shares will, when issued, be credited as fully paid and will rank pari passu in all respects with the existing Ordinary Shares, including the right to receive all dividends or other distributions made, paid or declared in respect of such shares after the date of issue of the new Ordinary Shares.
James Menzies, Executive Chairman of Seascape, commented:
"Whilst we are today announcing an important transaction in the farm-out of Block 2A offshore Sarawak, we are simultaneously announcing a small fundraising. This funding will ensure that the Company is able to close the farm-out deal, work on our DEWA project and continue to work on new opportunities, without stressing the balance sheet.
"This is also an opportunity to bring new institutional investors onto the share register, who appreciate our Southeast Asian strategy and who will be supportive long-term holders. This fund raising, together with proceeds from the Block 2A farm-out announced today, will put the Company in a strong position to deliver near-term growth through our portfolio of assets in Malaysia and across the wider Southeast Asian region."
Participation by Directors and Related Party Transaction
Certain Directors and members of the Company's senior management have participated in the Subscription to raise gross proceeds of £415 thousand, as set out below.
The FCA notifications, made in accordance with the requirements of MAR, are appended below.
James Menzies, Nick Ingrassia and Geraldine Murphy as directors of the Company are considered to be "related parties" as defined under the AIM Rules and accordingly their participation in the Subscription constitutes a related party transaction for the purposes of Rule 13 of the AIM Rules.
Graham Stewart, having not participated in the Subscription or the Placing, is independent of the Fundraising and considers, having consulted with Stifel, the Company's Nominated Adviser, that the terms of the participation by the Directors in the Subscription are fair and reasonable insofar as shareholders are concerned.
Admission and Total Voting Rights
Application has been made to the London Stock Exchange for admission to trading of the Fundraising Shares on AIM. It is expected that Admission will become effective at 8.00 a.m. on 4 December 2024.
Following Admission, the Company's issued and fully paid share capital will consist of 62,818,946 Ordinary Shares. The Company has no Ordinary Shares in treasury. Therefore, the total number of voting rights in the Company will be 62,818,946 Ordinary Shares. This number may be used by shareholders as the denominator for the calculations by which they will determine if they are required to notify their interest, or a change to their interest in, the Company under the FCA's Disclosure Guidance and Transparency Rules.
Capitalised terms have the meaning given to them in Appendix 2 to this Announcement, unless the context requires otherwise.