WHL signs agreement for recapitalization and makes management changes

Australian energy company WHL Energy Ltd. has entered into agreements with Energy Capital Partners Pty Ltd. (ECP) to facilitate a recapitalization of the company. WHL Energy has moved to implement a definitive action plan for immediate funding and cost savings in order to stabilize the company’s financial position.

In order for the company to meet its immediate funding requirements to lenders and creditors, it has accepted an offer that, while heavily dilutive to shareholders, allows the company to recapitalize and restructure its forward financial and asset position and continue to implement a significant cost reduction strategy.

The recapitalization proposal comprises the issue of convertible notes secured over the company’s assets to the value of $1.6 million (AUD 2 million), converting into ordinary fully paid shares in the company at $0.0008 (AUD 0.001) (subject to shareholder approval). Subject to the satisfaction of certain conditions precedent, ECP will subscribe for, or procure the subscription for, the convertible notes in two tranches of $0.8 million (AUD 1 million) June 4 and June 19. If shareholder approval is obtained for the conversion of the convertible notes, approximately 2 billion new ordinary shares in the company will be issued.

In consideration for ECP procuring the subscription for convertible notes, the company has agreed to issue ECP shares and options in the company and pay fees on the terms set out in the schedule to this announcement. The company will convene a shareholder meeting in due course to seek approval for the issue of the shares upon conversion of the convertible notes, along with the issue of the ECP options. If shareholder approval is obtained, the convertible notes will convert into shares in the company.

Proceeds from the recapitalization will be used to repay the company’s existing third-party debt facilities, which includes fees payable to the lenders; to pay any fees owing to ECP in connection with the issue of the convertible notes; and otherwise in accordance with a budget agreed between the company and ECP from time to time.

WHL Energy has also reorganized its management team, including:

  • Stuart Brown, non-executive director, taking up the role of chairman
  • Faldi Ismail, current chairman, remaining on the board as a non-executive director
  • David Rowbottam, managing director, agreeing to depart the company as of May 31
  • Graham Durtanovich being appointed to the board as a non-executive director

Commenting on the capital restructuring and cost cutting program, Brown said, “The oil and gas industry continues to face significant challenges during the current commodity price downturn, particularly for junior explorers. The cost of servicing ongoing debt facilities is no longer a sustainable option and this recapitalization, along with continuing cost reduction initiatives, provides the opportunity to conserve valuable cash and realize value from existing assets while seeking new growth and revenue generating opportunities.

“In addition to the proceeds from the convertible notes, it is also planned that all existing shareholders will be offered an opportunity to participate via a rights entitlement issue, following the upcoming shareholder meeting," Brown said. "The board believes in the underlying value of the company’s assets and that this recapitalization represents the company’s best option to deliver value to shareholders in the medium to longer term.”

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