3Legs Resources plc - Withdrawal of Requisition

18 October 2012
3Legs Resources plc - Withdrawal of Requisition

Withdrawal of Requisition of General Meeting and Appointment of New Group CEO


  • Withdrawal of Requisition of General Meeting
  • New CEO and enhanced technical team
  • Exciting Polish Baltic Basin programme
  • Intention to seek authority for share buyback

3Legs Resources plc (the "Company" and, together with its subsidiaries, the "Group" or "3Legs"), an independent oil and gas group focusing on the exploration and development of unconventional oil and gas resources, is pleased to announce that the notice received from Lynchwood Nominees Limited requisitioning a meeting of the Company's shareholders pursuant to section 67(2) of the Isle of Man Companies Act 2006 has been withdrawn with immediate effect.

In discussions with William Jeffcock, the beneficial owner of the shares held by Lynchwood Nominees, the Company has highlighted the considerable progress made in the Baltic Basin in the last twelve months, coupled with the appointment of a new CEO and the finalisation of an exciting 2012-13 drilling programme, all of which is described in more detail below.

Continued progress in the Company's western Baltic Basin concessions in Poland:

  • Through its exploration programme to date, the Company has achieved a significant de-risking of its western Baltic Basin concessions, demonstrating both the presence of hydrocarbons and that those hydrocarbons can be successfully flowed to surface. The Company's exploration programme for the remainder of 2012 and for 2013 has been designed to establish commerciality in one or more pay zones on its concessions.
  • Following its initial public offering, the Company drilled and tested two horizontal wells in 2011, the Lebien LE-2H well and the Warblino LE-1H well, on its western Baltic Basin concessions. On 19 March 2012, following the results of these two wells, ConocoPhillips gave notice of the exercise of its call option to acquire a 70% interest in the Company's three western Baltic Basin concessions, which the Company believes demonstrates ConocoPhillips' firm commitment to the Baltic Basin shales and their long term potential.
  • By performing detailed technical analysis of its own data and of data acquired from other operators in the basin through data trades, the Company has been able to refine further its geological model for the Baltic Basin, enabling it to high-grade its very large acreage position and to identify those areas of its concessions which offer the highest probability of success, by reason of the thickness of the target formations and reservoir rock properties. The Company's acreage evaluation has validated its original first mover acreage selection in 2007, which resulted in 3Legs securing what it still believes to be the most prospective acreage in any of the Baltic Basin, the Podlasie Depression and the Lublin Trough.
  • The Company conducted further testing of the Warblino LE-1H horizontal well during August and September 2012, when the well achieved an improved flow rate of 90 mscf/d, some five times the rate achieved when the well was first tested in November 2011. Testing equipment has now been mobilised to the Lebien location, where further testing is due to commence on the Lebien LE-2H horizontal well in the next few days. This well was first tested in September 2011, recording a flow rate of 450-520 mscf/d at the end of a 17 day period before being suspended.
  • Drilling commenced on the Company's fifth well in the Baltic Basin, the Strzeszewo LE-1, on 4 October 2012, and is proceeding according to schedule. This near-vertical exploration well represents a 7 km step-out from the Company's Lebien LE-2H horizontal well and its location was selected to target thicker net pay in both the Ordovician and Cambrian sections, in the high-graded area which the Company has identified within its western Baltic Basin concessions. The well is on schedule to be cored, logged and cased by the end of November 2012, to be followed by a programme of DFIT and/or hydraulic frac testing.
  • The Company has recently announced a drilling programme for 2013 comprising the drilling, coring and testing of two or more vertical wells in the Company's high-graded acreage on its western Baltic Basin concessions, with the option then to drill and test horizontal sections.
  • The exploration programme outlined above will result in a significant further de-risking of the Company's western Baltic Basin concessions. The programme is expected to cost £13.7 million net to 3Legs for the period up to the end of 2013, including an extensive testing programme for the Strzeszewo LE-1 well and for a minimum of two wells planned for 2013. Further testing of the wells to be drilled in 2013 is likely to continue into 2014.
  • The Board of Directors (the "Board") firmly believes that the exploration programme which the Company has designed in conjunction with ConocoPhillips represents the best possible strategy for further de-risking its western Baltic Basin concessions and hence creating significant value for its shareholders.
  • World-class co-venturer in ConocoPhillips

  • The Board believes that ConocoPhillips' participation underscores the attractiveness of the Company's western Baltic Basin concessions. ConocoPhillips has extensive shale oil and gas experience in the US, including in the Eagle Ford, Barnett and Bakken shale plays; and 3Legs, while it has been acting as operator, has benefited significantly from its access to ConocoPhillips' expertise, resources and personnel, complementing the Company's own industry experience and local knowledge. Following the notice of exercise of its call option in March 2012, ConocoPhillips took over the operatorship of 3Legs' western Baltic Basin concessions in September 2012, thus ensuring that the concessions continue to benefit from ConocoPhillips' world-class operational capabilities.
  • Strengthened management and technical team

  • The Board announces that Peter Clutterbuck has informed them of his intention to resign his position as a Director and CEO of 3Legs, in order to pursue other business interests.
  • The Board is delighted to announce that Kamlesh Parmar has been appointed as Group CEO. Mr. Parmar has been with the Company since its activities commenced in 2007 and has previously held the position of Group Commercial Director and Poland Country Manager. He has overseen all aspects of the Company's operations in Poland since inception, and in particular has managed the successful relationship with ConocoPhillips.
  • Mr. Parmar has achieved recognition both for the Company's achievements in Poland and for his own contribution to the development of the shale gas industry in Poland, being awarded "Professional of the Year" title at Poland's inaugural Shale Gas Awards gala in 2011. Mr. Parmar is also one of the four members of the Management Board of OPPPW, the Polish upstream oil and gas industry association.
  • The Company is pleased to announce the appointment of John Blair as Exploration Manager with immediate effect. Mr. Blair was most recently employed by Knowledge Reservoir LLC, a technical consultancy based in Denver, where he was responsible for both the firm's unconventional resource practice and its acquisition and divestiture practice worldwide. While at Knowledge Reservoir LLC, Mr. Blair led multi-disciplinary teams that assessed more than 100 unconventional resource plays around the world. He has also launched and run several successful E&P ventures of his own.
  • The Company will look to further strengthen its Board through the appointment of an additional Non-Executive Director.
  • The above appointments demonstrate the Company's continued firm commitment to its shale exploration activities in Poland as well as further strengthening the Company's management and technical capabilities. The Board believes that its technical capabilities, coupled with the Company's strong local knowledge, are essential for the ongoing collaborative relationship with ConocoPhillips and for both protecting and enhancing shareholder value in the Baltic Basin.
  • Future actions to deliver shareholder value

  • The Company's exploration programme for 2012-13 has been designed to establish commerciality in one or more pay zones on its concessions. This programme has been finalised with ConocoPhillips and the Company expects to commit to its implementation in the coming days.
  • As at 30 June 2012, the Company had cash reserves of £45.4m. The Company projects that it will have cash reserves of approximately £26 million as at 31 December 2013, based on its planned 2012-13 work programme on its western Baltic Basin concessions. The Company's expenditure has been and will continue to be managed carefully, focusing on what is essential to the continued exploration of its acreage position and to maintaining its high calibre technical team.
  • While the Company's focus remains firmly on its western Baltic Basin concessions, the Board wishes to retain the flexibility to investigate new opportunities which have the potential to add value to the Company's existing portfolio. In these circumstances, the Board would consult with major shareholders before committing any of the Company's cash reserves to significant new opportunities.
  • 3Legs shares currently trade at a discount to the value of the Company's cash reserves. The Board believes this significantly undervalues the Company and accordingly will seek authority from shareholders to enable the repurchase of its shares.
Kamlesh Parmar, CEO of 3Legs, said:

"I am delighted to be stepping up to the new role as CEO of 3Legs at a time when the Company has a busy and exciting forward work programme through 2012 and 2013.

Poland's Baltic Basin continues to offer huge potential and 3Legs' interests are in the sweet spot of that region. We remain committed to maximising the commercial opportunities presented by these assets.

Our experienced management and technical team, working in conjunction with our world-class co-venturer ConocoPhillips, is best placed to deliver on our goals.

We strongly believe the equity markets are significantly undervaluing the Company's potential and, while this continues, we will take advantage of this to the benefit of our shareholders by seeking authority to buy back shares."

For further information contact:
3Legs Resources plc
Kamlesh Parmar, CEO
Alexander Fraser, CFO
Tel: +44 1624 811 611
Jefferies Hoare Govett
Simon Hardy
Jamie Buckland
Tel:+44 207 029 8000
College Hill
Matthew Tyler
Catherine Wickman
Nick Elwes
Tel:+44 207 457 2020

This information is provided by RNS
The company news service from the London Stock Exchange