Crown Energy enters into agreement with international investor on private placement of shares and warrants of at least SEK 63 million and up to SEK 126 million

Crown Energy AB (“Crown Energy” or the “Company”) is pleased to announce the signing of an agreement for a private placement of shares and warrants in Crown Energy of at least SEK 63 million and up to SEK 126 million. The board of directors of Crown Energy will propose that a shareholders meeting to be held on 4 May 2016 resolves on an issue of 31.5 million units to an international investor Cement Fund SCSp (Société en Commandite Spéciale) (“Cement Fund” or the “Investor”), of Luxemburg, or a newly created SPV purposed to do the investment in Crown Energy. Each unit consists of one new share and one warrant to subscribe for one share. The subscription price per unit is SEK 2. Each warrant gives the Investor right to subscribe for one new share to a subscription price of SEK 2 during a period of 24 months from the completion of the investment, which is scheduled for when the new shares and the warrants have been registered with the Swedish Companies Registration Office (the “SCRO”). The proceeds from the private placement will initially be SEK 63 million and give the Investor an initial ownership in Crown Energy amounting to 34.0 per cent of the shares and votes. In case the Investor exercises the warrants in full, Crown Energy will be provided with SEK 63 million in additional proceeds before costs, and the Investor will subsequently be the owner of 50.8 per cent of the outstanding shares and votes. The private placement involves an initial dilution effect for the existing shareholders of 34.0 per cent and another 25.4 per cent (in total 50.8 per cent) in case the warrants are fully exercised. Shareholders representing an ownership representing a total of approximately 58.3 per cent of shares and votes of the Company have committed to vote in favour of the private placement at the shareholders’ meeting. 

The private placement

Crown Energy will with this investment take a huge step forward in both securing short term financing needs, including full repayment of the outstanding convertible loans (KV 1 2013/2016) due on 30 April 2016, but also in terms of being able to invest significant capital and resources into its existing projects. Significant emphasis will be put towards the Company’s Iraqi project. The Investor will in addition to the cash investment also contribute with expertise and vast competence in the oil and gas sector. The competence the Investor represent covers the whole value chain and ranges from exploration, development and production, but also trading business, which could in the future contribute to a healthy cash flow generating business division for Crown Energy.

Crown Energy, with its existing shareholder and investment base, has not been able to secure this type of financing to date, but for a new strong investor to come in has been crucial to revamp the Company to meet the current market situation. Crown Energy has been discussing an investment into Crown Energy with Cement Fund for quite some time.

Crown Energy’s existing asset base in whole is interesting for the Investor as it sees large development potential throughout the project portfolio. However, Cement Fund and its investment will be particularly focused on Iraq, where it sees the unlocking of a great deal of potential value to Crown Energy, its shareholders, the Salah ad-Din region and Iraq itself, going forward.

Use of proceeds

The proceeds from the Investor shall be used primarily to progress the Iraq development project leading to oil production and revenue.

In addition, the funds will be used for the repayment of outstanding convertible loans, and payment of running general and administrative expenses, normal license management costs involved in Crown Energy’s current portfolio.

Crown Energy’s project in Iraq needs start-up capital for planning activities, such as acquisition of material, inventory of existing equipment and installations, and implementing an agreed forward business plan. Next steps will be to lay the foundation for reactivating existing oil assets and to create a re-development plan which will include operational activities such as drilling and works on technical installations in order to enable production of hydrocarbons in the area. The warrants to subscribe for an additional 31.5 million shares are planned to cover the further steps which would include the re-development of an existing oil field and thus initiate the production of oil and a revenue stream for Crown Energy.

Mandatory bid exemption from the Swedish Securities Council

Cement Fund has been granted an exemption from the mandatory bid requirement (by becoming owner of the initial shares and the subsequent shares following exercise of the warrants) by the Swedish Securities Council (Sw: Aktiemarknadsnämnden) as the private placement means that the Investor will be the owner of more than 30 per cent of the total number of shares and votes of Crown Energy. The exemption is subject to that:

• the shareholders, prior to the shareholders’ meeting, are informed of the ownership level which the Investor may get by subscribing for the shares and exercising the warrants; and
• the resolution to issue the units are supported by at least two thirds (2/3) of both the votes cast as well as the shares represented at the shareholders’ meeting, whereby any shares held by Cement Fund shall be excluded from the calculation.

The units

The number of units shall be 31,500,000. Each unit consisting of one new share and one warrant. Each Warrant entitles the holder to subscribe for one new share in the Company. The period for subscribing for new shares based on the warrants shall run from the closing date (i.e. when the units have been registered with the SCRO and allocated to the Investor’s securities account) and up to and including the day falling twenty-four months thereafter.

The issuing of units is subject of some conditions before the investment will close.

• Subscription will take place at the latest five days following the AGM.
• The units will be paid in cash amounting to SEK 63 million.
• Through the issuance of shares under the units, the Company’s share capital will increase with a maximum of SEK 926,086.357212. At full subscription of shares through exercise of the warrants, the Company’s share capital may increase with an additional maximum of SEK 926,086.357212.
• In total, a number of 63 million new shares may be issued as an effect of the private placement of units. In the first tranche a total of 31.5 million shares will be issued and the second tranche may lead to another 31.5 million shares being issued.
• The private placement involves an initial dilution effect for the existing shareholders of 34.0 per cent and another 25.4 per cent (in total 50.8 per cent) in case the warrants are fully exercised.

The board of directors of the Company will call for a shareholders’ meeting and propose that the shareholders resolve to issue the units as described above, and also resolve on a new composition of the board of directors to accommodate the Investor’s request for board representation in the Company. The Company will also initiate a matter with the SCRO for purposes of registering the units, and will prepare a prospectus to allow the new shares, once issued and registered with the SCRO and Euroclear, to be admitted to trading on NGM stock exchange. The Prospectus shall be duly approved and registered by the Swedish Financial Supervisory Authority (the “SFSA”) on or around 9 May 2016.

The warrants

The warrants that are part of the unit investment are transferrable to third parties if the Investor so chooses. The number of warrants shall be 31,500,000. Each warrant entitles the holder to subscribe for one new share at 2 SEK per share in the Company. The period for subscribing for new shares based on the warrants shall run from the closing of the investment and up to and including the day falling twenty-four months thereafter.

Voting undertakings

Shareholders representing an ownership representing a total of 58.3 per cent of shares and votes of the Company have committed to vote in favour of the private placement at the shareholders’ meeting

Subscription Agreement and due diligence

The private placement is regulated among the parties in a subscription agreement entered into between the Company and Cement Fund on 1 April 2016. Prior to entering into the subscription agreement, the Investor has been allowed to conduct a legal and commercial due diligence of the Company. The investment is subject to various conditions, e.g., that the shareholders vote in favour of the unit issue and the new board and that a prospectus is approved by and registered with the SFSA on or around 9 May 2016.

Prospectus

The shares issued under the units will require a prospectus to be completed before the shares are admitted to trading on NGM Equity. A prospectus with full information regarding the units will be completed and is expected to be published on or around 9 May 2016.

About Cement Fund

Cement Fund SCSp (Société en Commandite Spéciale) is a Luxemburg based investment fund focussed at investments in the oil and gas industry. The fund is represented by Pierre-Emmanuel Weil, a French citizen with long experience of structuring investments within the oil and gas industry.

Cement Fund will appoint new board members that will be presented before or on the proposed AGM. Further updates on Cement Fund and its representatives will be given on or before the AGM and the completion of the investment.

Andreas Forssell, CEO of Crown Energy comments:

“I am very proud of being able to announce a deal for Crown Energy and its shareholders that we have been working with for a long time. This will make a tremendous contribution to the Company. Cement Fund will bring capital and expertise that will help to develop our assets and bring future business into Crown Energy in a way that we have not been able to generate with our existing outfit. The new Crown Energy will have added to its international network of high level contacts throughout the oil and gas industry. Furthermore, the capital injection together with the capabilities and contacts will enable tremendously to the further development on Crown Energy’s assets. We are especially excited to be able to continue our development of our Iraqi asset at a time that is very exciting as the political- and security situation has much improved during the last three to six months, and we will be able to conduct operational works there. This deal, together with our deal with Africa Energy a few months back has definitely revamped Crown Energy into becoming a completely new player in the industry. A combination of an even stronger balance sheet without external debts and with cash, with added expertise and contacts that will emphasise on both exploration activities, but also cash flow generating business, potentially including future trading activities, but also from oil production. This is a receipt that the “low cost/deal focussed” strategy that we set forth during the autumn 2015 has been appreciated.” says Andreas Forssell, Crown Energy CEO.

Preliminary Time table

4 May 2016         Annual General Meeting

6 May 2016         Registration of the units with the Swedish Companies Registration Office

9 May 2016         Publication of prospectus

12 May 2016       The new shares are admitted to trading on NGM Equity

Crown Energy AB (publ) discloses above information pursuant to the Swedish Securities Market Act and/or the Swedish Financial Instruments Trading Act. The information was released for publication on April 4, 2016, 08:15 AM.

MORE INFORMATION

Please contact Andreas Forssell, CEO, Crown Energy AB

+46 8 400 207 20

+46 760 15 15 95

ABOUT CROWN ENERGY

Crown Energy is an international oil and gas company engaged in exploration in Africa and Middle East. Growth is created by developing assets in early stages and then maximising value by introducing appropriate industry partners in the development and production stages. For more information please visit www.crownenergy.se.