PA Resources invites to subscription for bonds and publishes prospectus

The board of directors for PA Resources has decided to offer institutional investors and the general public in Sweden, including bond holders under PA Resources’ current bond loan 2010/2013, to subscribe for bonds under a new bond loan 2013/2016. The maximum frame work amount of the bond loan is SEK 1,000 million, whereof approximately SEK 750 million are intended to be issued during the application period 16–27 September 2013. Two institutional investors have agreed to subscribe for more than 50 percent of this part of the loan. The bond loan, together with the recently implemented rights issue, is expected to secure the company’s short term funding need until the end of 2014.

The offer in brief

• The board of directors of PA Resources AB (publ) (”PA Resources” or ”the Company”) has decided to make an offer to subscribe for bonds under a new bond loan 2013/2016 to institutional investors in Sweden and abroad and the general public in Sweden, including bond holders under PA Resources current bond loan 2010/2013.
• The maximum frame work amount of the bond loan is SEK 1,000 million, whereof bonds in an amount of approximately SEK 750 million are intended to be issued with application period 16-27 September 2013 (the “Offer’)
• The Offer is divided in two parts: an institutional offer and an offer to the public in Sweden. Participants in both the institutional offer and the offer to the public that are bond holders under PA Resources’ bond loan 2010/2013 can use these bonds as payment for new bonds.
• The bonds are issued at a nominal amount of SEK 10,000 per bond and the annual interest is expected to be set at a range of 11.50–13.50 percent
• The minimum subscription in the offer to the general public in Sweden is SEK 10,000, equivalent to one bond, and thereafter in multiples of SEK 10,000.
• The minimum subscription in the institutional offer is SEK 1 million, equivalent to 100 bonds, and thereafter in multiples of SEK 10,000.
• If the payment is made with bonds under PA Resources’ current bond loan 2010/2013, each bond with a nominal amount of SEK 10,000 under bond loan 2010/2013 gives right to one bond with a nominal amount of SEK 10,000 under bond loan 2013/2016 (in addition, accrued interest until and including the settlement day will be paid in cash by the Company).
• The application period is 16–27 September 2013.
• Two institutional investors have agreed, subject to certain conditions, to subscribe and pay for bonds corresponding to a nominal amount of approximately SEK 425 million, provided that bonds corresponding to a total amount of SEK 750 million are issued. The Offer is thus underwritten to approximately 57 percent.
• A prospectus regarding the bond loan and the Offer is available on the Company’ website, www.paresources.se, and on Carnegie Investment Banks AB’s (publ) (”Carnegie”) website, www.carnegie.se.

Background and reasons                   

PA Resources has recently carried out a fully underwritten rights issue of shares that has raised approximately 801 MSEK after transaction costs to the Company (the “Rights Issue”). PA Resources also implemented an underwritten rights issue in February 2013. The previous rights issue was implemented together with a set-off issue of the majority of the Company’s then outstanding convertible bond loan, which together increased the Group’s equity with SEK 1,572 million (the “Recapitalization”). Taken together, these transactions have strengthened Pa Resources’ equity with SEK 2,373 million since February 2013.

Gunvor Group the largest shareholder

Through the Recapitalization and the Rights Issue, Gunvor Group, with an extensive experience in the international oil industry, has become the largest shareholder in the Company and holds just below 50 percent of the shares and votes in PA Resources. Gunvor Group is also lender to the Company through a reserve based credit facility.

Increased funding need due to changed circumstances for the previous business plan

In connection with the Recapitalization that was carried out during the end of 2012 and the beginning of 2013, a business plan was presented that was based on, among other things, the assumption of a significant farm out of assets and that the Company would be in a position to refinance planned amortizations, including the SEK bond loan maturing on 15 October 2013, in the debt markets on acceptable terms.

Following the Recapitalization, the production at the Azurite field in the Republic of Congo has been significantly below this business plan. The field has reached its economic limit and planning for early abandonment is well advanced. A final lifting of crude oil from the field is expected to take place late in the second half of 2013, from which PA Resources’ share of the proceeds is expected to mainly cover the Company’s share of the field abandonment cash cost. However, a decision of an early termination of the field may result in a need for a substantial provision.

Funding needs until and including the end of 2014

As a result of the above, the total estimated funding need of the Company until 31 December 2014 amounts to at least SEK 1.7 billion before and SEK 0.9 million after the Rights Issue (including repayments and amortizations of outstanding Swedish bond loan, Norwegian bond loan and convertible bonds). There are additional planned but not yet decided investments that are not included in this forecast. Further funding will also be required after 31 December 2014 to finance additional capital expenditure.

Due to these circumstances the Rights Issue was carried out in order to strengthen the Company’s balance sheet and increase confidence among investors to be able to refinance itself in the debt markets on acceptable terms through the issuance of a new bond loan of up to SEK 1 billion. The board of directors believes that the company will be able to fund any remaining capital need by 31 December 2014 through debt financing on acceptable terms.

Medium term outlook for investments and production

In connection with the prospectus that was published on 14 August 2013 regarding the implemented Rights Issue, a forecast was presented based on the ongoing review by the board of directors and management of PA Resources’ assets, strategy and funding as of 14 August 2014. The presented scenario was based on the assumption that the total investments by 2017 are approximately USD 600 million. Of these, the majority are attributable to development costs. Given that the outcome of this conservatively estimated scenario is successful, the Company would reach a production of around 15,000 to 20,000 barrels of oil equivalents per day by 2018, which presupposes that development projects are generally completed according to plan. PA Resources expects to fund the development plan based on a minimum capital need of SEK 1.7 billion before and SEK 0.9 billion after the Rights Issue by the end of 2014. After 2014, additional funding will be required for future investments.

Issue of bond loan in a maximum amount of SEK 1,000 million

Against this background, the board of directors has decided to make an offer to subscribe for bonds to institutional investors in both Sweden and abroad, and the general public in Sweden including bond holders under PA Resources bond loan 2010/2013. The maximum frame work amount of the bond loan is SEK 1,000 million, whereof bonds in an amount of approximately SEK 750 million are intended to be issued in the Offer. However, the Company reserves the right to withdraw the Offer or the issue of bonds or to issue bonds in a higher or lower amount than SEK 750 million.

The annual interest of the bond loan is expected to be set in a range of 11.50–13.50 percent. The interest range has been set by the Company in discussion with Carnegie based on the estimated investment interest from institutional investors. The interest rate will be determined in accordance with a book building process.

The short term funding need secured through the bond loan and the Rights Issue

The Offer, in combination with the recently implemented Rights Issue, is expected to allow scheduled repayments and thereby significantly reduce the Company’s risk exposure. The transactions are also expected to enable the continued development of key assets and put the Company in a much better negotiating position regarding future asset-based transactions.

Additional information about the Offer

General:

The Offer to subscribe for bonds is directed to institutional investors in Sweden and abroad, and the general public in Sweden including bond holders under PA Resources bond loan 2010/2013. The maximum frame work amount of the bond loan is SEK 1,000 million, whereof bonds in an amount of approximately SEK 750 million are intended to be issued in the Offer. The Offer is divided in two parts: an institutional offer and an offer to the public in Sweden. Participants in both the institutional offer and the offer to the public that are bond holders under PA Resources bond loan 2010/2013 can use these bonds as payment for new bonds. The Company reserves the right to withdraw the Offer or the issue of bonds or to issue bonds in a higher or lower amount than SEK 750 million.

Nominal amount and interest:

The bonds will be issued in a nominal amount of SEK 10,000 per bond. The annual interest of the bond loan is expected to be set at a range of 11,50–13,50 percent. The interest rate will be determined in accordance with a book building process and is expected to published trough a press release around 30 September 2013. The annual interest will not be set below 11.50 percent.

Application period:

16–27 September 2013. The Company reserves the right to extend the application period.

Minimum subscription:              

The institutional offer:

SEK 1,000,000, equivalent to 100 bonds, and thereafter in multiples of SEK 10,000. In the event of payment in the form of bonds under PA Resources bond loan 2010/2013, each bond under the bond loan 2010/2013 corresponds to a cash payment of 10,000 SEK (in addition, accrued interest until and including the date of payment will be paid in cash by the Company)

The offer to the public:

SEK 10,000, equivalent to a (1) bond, and thereafter in multiples of SEK 10,000. In the event of payment in the form of bonds under PA Resources bond loan 2010/2013, each bond under the bond loan 2010/2013 corresponds to a cash payment of 10,000 SEK(in addition, accrued interest until and including the date of payment will be paid in cash by the Company)

Allocation and settlement day:

Allocation of bonds to and within each part of the Offer will be made on the basis of demand and will be decided by the board of directors of PA Resources with consultation from Carnegie, whereby the objective is to achieve a good investor base. In the event of over subscription, subscribers of bonds who want to pay in the form of bonds under the bond loan 2010/2013 will be prioritized with the objective of providing full allotment.

The institutional offer:

Subscriptions from institutional investors who are expected to be long-term bond holders in PA Resources and subscriptions from institutional investors who subscribe early will be prioritized. There is no allotment guarantee for specific institutional investors.

The offer to the public:

Allocation is not dependent on when the subscription is made during the application period. In the event of over subscription, allotment may be done with a smaller number of bonds than stated in the subscription or through a random selection. Assuming allocation is made, this will be done with a minimum of one bond, equivalent to an amount of SEK 10,000.

Underwriting agreement

The company has received commitments from two institutional investors (the “Underwriters”). The Underwriters have agreed, subject to certain conditions to subscribe and pay for bonds corresponding to a nominal amount of approximately SEK 425 million, provided that bonds corresponding to a total amount of SEK 750 million are issued. If bonds corresponding to a total amount greater than SEK 750 million are issued, the commitments increase to a maximum amount of SEK 510 million if bonds in an aggregated amount of SEK 950 million or higher are issued. If the amount of the bond issue is less than SEK 750 million the commitments decreases. The offer is underwritten to approximately 57 percent assuming a bond issue in an amount of SEK 750 million.

Prospectus and subscription forms

The prospectus relating to the Offer has been published today. The prospectus, along with the application forms, is available on the Company’s website, www.paresources.se, and Carnegie’s website, www.carnegie.se. The prospectus can also be ordered over the phone at +46 (0)8 5886 9487.

Preliminary schedule

PA Resources has the right to extend the application period for the Offer and the right to postpone the settlement day. The Company also reserves the right to withdraw the Offer or implement the offer even if the bonds correspond to an amount less than SEK 750 million.

Financial and legal advisors

Carnegie is financial advisor to PA Resources. Gernandt & Danielsson Advokatbyrå KB is legal advisor to PA Resources and Carnegie.

Stockholm, 13 September 2013
PA Resources AB (publ)

For queries, please contact:
Tomas Hedström, CFO
+46 8 545 211 56

PA Resources AB (publ) is an international oil and gas group which conducts exploration, development and production of oil and gas assets. The Group operates in Tunisia, Republic of Congo (Brazzaville), Equatorial Guinea, United Kingdom, Denmark, Netherlands and Germany. PA Resources is producing oil in West Africa and North Africa. The parent company is located in Stockholm, Sweden. PA Resources’ net sales amounted to SEK 2,184 million in 2012. The share is listed on the NASDAQ OMX in Stockholm, Sweden. For additional information, please visit www.paresources.se.

The above information has been made public in accordance with the Securities Market Act and/or the Financial Instruments Trading Act. The information was published at 8:00 a.m. CET on 13 September 2013.

IMPORTANT NOTICE

The information in this press release is not for release, publication or distribution, directly or indirectly, in or into the United States, Australia, Hong Kong, Japan, Canada, Switzerland, Singapore, South Africa or New Zeeland. The distribution of this press release in certain other jurisdictions may be restricted. The information in this press release shall not constitute an offer to sell or the solicitation of an offer to purchase any securities in PA Resources in any jurisdiction. This press release does not constitute, or form part of, an offer or solicitation to purchase or subscribe for securities in the United States. The securities referred to herein may not be offered or sold in the United States absent registration or an exemption from registration as provided in the U.S. Securities Act of 1933, as amended. PA Resources does not intend to register any portion of the offering of the securities in the United States or to conduct a public offering of the securities in the United States. Copies of this announcement are not being distributed or sent and may not be distributed or sent to the United States, Australia, Hong Kong, Japan, Canada, Switzerland, Singapore, South Africa or New Zeeland.

This document has not been approved by any regulatory authority. This document is a press release and not a prospectus and investors should not subscribe for, or purchase any securities referred to in this document, except on the basis of information provided in the prospectus published by PA Resources and available on PA Resources’ website.

EUROPEAN ECONOMIC AREA

PA Resources has not resolved to offer to the public securities in any Member State of the European Economic Area other than Sweden and any other jurisdiction into which the offering of securities may be passported. Within such Member States of the European Economic Area other than Sweden (and any other jurisdiction into which the offering of securities may be passported) and which has implemented the Prospectus Directive (each, a “Relevant Member State”), no action has been undertaken as of this date to make an offer to the public of securities requiring a publication of a prospectus in any Relevant Member State. As a result hereof, the securities may only be offered in a Relevant Member State: (a) to a qualified investor (as defined in the Prospectus Directive or applicable law), or (b) in any other circumstances, not requiring PA Resources to publish a prospectus as provided under Article 3(2) of the Prospectus Directive.

For the purposes hereof, the expression an “offer to the public of securities” in any Relevant Member State means the communication, in any form, of sufficient information on the terms of the offer and the securities to be offered so as to enable an investor to decide to purchase any securities, as the same may be varied in a Relevant Member State due to the implementation of the Prospectus Directive in that Member State and the expression “Prospectus Directive” means Directive 2003/71/EC including any relevant implementing measure in each Relevant Member State.

Carnegie is acting for PA Resources and no one else in connection with the bond Loan and the Offer and will not be responsible to anyone other than PA Resources for providing the protections afforded to its clients or for providing advice in relation to the bond loan, the Offer and/or any other matter referred to in this announcement.

Carnegie accepts no responsibility whatsoever and makes no representation or warranty, express or implied, for the contents of this announcement, including its accuracy, completeness or verification or for any other statement made or purported to be made by Carnegie, or on its behalf, in connection with PA Resources, the securities, the bond loan and the Offer, and nothing in this announcement is, or shall be relied upon as, a promise or representation in this respect, whether as to the past or future. Carnegie accordingly disclaims to the fullest extent permitted by law all responsibility and liability whether relating to damages, contract or otherwise which it might otherwise have in respect of this announcement or any such statement.

FORWARD-LOOKING STATEMENTS

This press release contains forward-looking statements that reflect management’s current views with respect to future events and potential financial performance. Although PA Resources believes that the expectations reflected in such statements are reasonable, no assurance can be given that such expectations will prove to have been correct. Accordingly, results can differ materially from those set out in the forward-looking statements as a result of various factors. You are advised to read this announcement, and the prospectus and the information incorporated by reference therein, in their entirety for a further discussion of the factors that could affect the PA Resources’ future performance and the industries in which the company operates. In light of these risks, uncertainties and assumptions, it is possible that the events described in the forward-looking statements in this announcement may not occur.

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