FINANCING / Sands Petroleum AB Proposes Offering to Qualified
Shareholders
TSE SYMBOL: SPB
NASDAQ SYMBOL: SANPY
MARCH 2, 1998
STOCKHOLM, SWEDEN--
Exchange Rate SEK to CDN: 5.5907 Exchange Rate SEK to US: 7.9870
The Board of Directors of Sands Petroleum AB ("Sands") have
proposed that qualified shareholders in the company be given the
opportunity to acquire up to 50 percent of the shares of a wholly-
owned subsidiary, Sodra Petroleum AB (Sodra), which owns 100
percent of the prospecting licence, Tranche F offshore the
Falkland Islands. Under the proposal, qualified shareholders of
Sands will have the right to subscribe for 1 new share in Sodra
Petroleum for each two Sands shares they hold. The proposed issue
price of each new share in Sodra is SEK 7.50. Qualified
shareholders are shareholders resident outside the U.S. and
Canada. The right which would otherwise be issued to
non-qualified shareholders will, instead, be issued to a trustee
to sell on behalf of and for the benefit of the non-qualified
shareholders. A total of approximately 40 million shares in Sodra
will be offered, corresponding to just over SEK 300 million. The
offer, which is subject to receiving all applicable regulatory
approvals, will become definitive when the prospectus is made
available, around 23 March 1998.
Background and Reasons
Following the merger with International Petroleum Corporation at
the end of last year, Sands, which proposes to change its name to
Lundin Oil AB, owns 100 percent of the exploration licence,
offshore the Falkland Islands, called Tranche F. This area is
located north of the Falkland Islands and is a part of an
unexplored, highly prospective sedimentary basin. Geologically
and timewise, the area is very similar to the North Sea. Together
with a number of other oil companies, Sands will carry out
exploration drilling in this sedimentary basin in 1998.
A drilling rig of the semi-submersible type, the Borgny Dolphin,
is currently on its way to the Falkland Islands and is expected to
arrive at the end of April. The first exploration drilling is
expected to start shortly thereafter with Amerada Hess drilling
first. This will be the first test in the area to determine
whether the basin in question contains hydrocarbons. Therefore,
results showing indications of oil and natural gas, even if they
are not a commercial discovery, would be extremely attractive for
the potential of the whole basin.
Amerada Hess will drill north of the Sands' area in Tranche A.
Sands plans to start drilling in October 1998. Please see
attached map.
To finance the exploration project, it is proposed to issue new
shares to shareholders. To this extent, it has to been taken into
consideration that exploration drilling offshore the Falklands is
a high risk project, but also a project which, if oil is
discovered, offers good potential for capital appreciation.
The forthcoming offer to shareholders means that the entire
initial exploration phase will be financed through the new issue
of shares in a subsidiary company, which will thereafter be 50
percent, minus one share, owned by the new shareholders, and 50
percent, plus one share, owned by the parent company, Sands
Petroleum.
Through this process, the new shareholders of Sodra are presented
an investment opportunity which, if oil is discovered, offers high
leverage. At the same time, the parent company maintains its
exposure through a similar 50 percent holding in Sodra.
The exploration project offshore the Falkland Islands is expected
to last until October in the year 2001, when the exploration
licence expires. If no commercial discovery is made up until this
point in time, there would be no reason to extend the licence, and
the net asset value of Sodra would be almost zero. To limit the
downside, should the exploration not lead to the discovery of oil,
it is therefore proposed that Sodra shares be convertible into
shares in the parent company, Sands Petroleum, on the basis of 12
Sodra for 1 Sands share. The conversion privilege is subject to
shareholder and regulatory approval.
Mathematically, the structure of the convertible means that if
Sands shares, at the time of conversion, are worth SEK 90, Sodra
shares would have a value corresponding to the original price of
SEK 7.50.
A maximum of approximately 3.4 million Sands shares would be
issued upon the conversion of Sodra shares.
The prospectus is expected to be made available around 23 March,
1998.
The application period will be from 30 March to 23 April, 1998.
Sands Petroleum AB is quoted on the Stockholm Stock Exchange O
list, the Toronto Stock Exchange under the symbol "SPB", and on
NASDAQ under the symbol "SANPY".
Note: Location map available from the Company at the phone number
listed below. |
