The Directors believe that an opportunity exists to create a new AIM investing company focused initially on offshore and onshore hydrocarbon production, energy storage, infrastructure and energy generation projects. The targeted geographies are the UK and Continental Europe. The investment strategy is to acquire assets with a role in energy transition with an execution strategy of pursuing a rigorous approach to asset selection and active forward-looking stewardship. The strategy is reflective of and builds upon the experience of the Board in the sector to date and also encompasses areas and opportunities which the Board see as having future potential including asset repurposing in the context of the “Net Zero 2050” agenda, originally formulated by the European Climate Foundation and now adopted by the UK Government though a number of strategies which have been adopted by the executive arms of Government, including the UK Oil and Gas Authority.
The Directors fully embrace the “Net Zero 2050” and energy transition agenda. They believe this will create opportunities, because many exploration, production and infrastructure companies are yet to substantially respond or adapt to the issues raised. The Directors also believe that the consequences of this transition may lead to a number of industry players chosing to exit the area, which may create opportunities for the Company.
Investment Objectives and Strategy
In assessing Acquisition opportunities, the Directors will identify and evaluate entities owning licence interests, licence assets, physical infrastructure assets or generation capacity which have the potential for rapid development but have not been the subject of meaningful investment to date or where there is scope for operational turnaround. Such opportunities exist in a number of circumstances including, in the onshore arena, licence interests that may have been acquired for alternative development; interests which may have been acquired due to geographical or geological proximity to licences already held; or where the existing owner may be prioritising other portfolio assets, making those assets non-core to current activities. In the offshore sector the Directors believe that there are opportunities to acquire and build diversified operations made up of cash generative, non-operating interests in circumstances where existing owners are seeking to rationalise portfolios of wider interests, particularly in circumstances where the global decline in hydrocarbon prices combined with a change in the focus of regional governing bodies has forced such owners to review and rationalise the scale and scope of their operations.
The Directors consider that the Company has the expertise to develop assets which may have been de-prioritised in the past due to planning and access complexities. The Directors may target corporate entities where they believe that the potential value of the licence interests and/or potential Reserves are not reflected in the value attributed to that entity by public markets. The Directors intend to assess such opportunities using their combined expertise and knowledge of the sector in conjunction with all available geological data and the services of expert resource engineers and consultants as part of conducting diligence on Acquisition opportunities.
The Company has initially identified (by way of appraising the proposed strategy and the opportunity) several potential target transactions which the Directors believe could be completed in the near term. Of these potential transactions, the Directors believe that several may be capable of rapid execution with minimal initial cash outlays, thereby allowing the Company’s cash resources to be employed in the rapid development of its operational assets. The Directors have made these assessments on the basis of information in the public domain only and accordingly there can be no guarantee or expectation that any owners of any particular asset(s) would be receptive to an approach from the Company. The strategy and the opportunity accordingly remain speculative and untested at the current time.
The Directors believe that there is increasing appetite in the power industry for domestic gas production opportunities and power response projects. This is against a background where traditional junior exploration and production companies are finding little private capital support for smaller scale stand-alone projects. The Directors have noted with some interest, recent merger activity in the power generation sector and the emergence of opportunistic corporate consolidation as a means to develop incremental generation capacity and efficiencies.
Following completion of any Acquisition, the objective of the Company will be to operate the acquired business and implement an operating strategy with a view to generating value for its Shareholders. This may be achieved through either, or both of: operational improvements; and/or complementary acquisitions. The Directors will maintain a focus on cash generation and ultimately a progressive dividend policy.
The Company’s efforts in identifying a prospective target company or business in the upstream and downstream hydrocarbon production and power sector will not be limited to a particular geographic region and, whilst the focus will initially be on the UK and Continental Europe assets and the Continental Shelf, it is possible that an Acquisition with compelling potential may be found in Continental Europe, Ireland or the Scandinavian region.
The Company has not engaged or retained any agent or other representative to identify or locate any suitable Acquisition candidate, to conduct any research or take any measures, directly or indirectly, to locate or contact a target company or business. To date, the Company’s efforts have been limited to organisational activities as well as activities related to the Fundraising. The Company may subsequently seek to raise further capital following any Acquisition to allow the expedited development of the assets acquired if there are commercially compelling reasons to do so.
The Company’s financial resources will be invested in either a small number of projects or one large investment. In either case it is highly likely that any transaction in which the Company acquires non-investment assets will be deemed to be a Reverse Takeover under the AIM Rules. In all cases, the Directors intend to mitigate risk by undertaking appropriate due diligence and transaction analysis. Any transaction constituting a Reverse Takeover under the AIM Rules will also require Shareholder approval.
The Directors are aware of the changes in working practises that have been accelerated as a consequence of the COVID-19 pandemic. Consequently the Company will adopt, from the outset, a ﬂexible approach to physical ofﬁces and meeting places and will ensure that IT and other systems are in-place to ensure this is effective. The Directors believe that this will not only equip the Company for the current environment but will also, in the longer term, be attractive to potential employees, reduce G&A expenses and consequentially improve Shareholder returns while reducing the Company’s carbon footprint.