ANTARES ENERGY LIMITED A.C.N. 009 230 835
Ground Floor PO Box 690
63 Hay Street West Perth WA 6872
Subiaco WA 6008 www.antaresenergy.com
22 March 2016 Ms Anjuli Sinniah
Adviser, Listings Compliance (Perth) ASX Compliance Pty Ltd
Level 40, Central Park
152-158 St Georges Terrace PERTH WA 6000
Dear Ms Sinniah |
ANTARES ENERGY LIMITED (COMPANY OR ANTARES OR AZZ): ASX AWARE QUERY |
We refer to ASX's letter to the Company dated 10 March 2016 in relation to the ASX aware query ("ASX Letter"), as enclosed with this letter.
The ASX Letter requests that the Company respond to a number of questions relating to:
The "Note Repayment Extension" which is defined in the ASX Letter as information relating to:
"The Company has insufficient cash reserves to satisfy the redemption notices received to date for 11,190,669 notes (Notes) for a total redemption value of $23,821,338;
a meeting to be held with convertible noteholders to obtain:
An extension of the repayment date to 31 March 2017;
A moratorium on the payment of any interest from 31 January 2016 to 30 April 2017;
Increase the conversion rate so that one note is convertible into four fully paid ordinary shares."
The "Delayed Assets Sale" which is defined in the ASX Letter as information relating to:
"On 30 October 2015, noteholders approved an extension of the reset date for the Notes to 31 March 2016 to allow AZZ sufficient time to progress the sale of its Northern Star and Big Star Projects ("Assets"). Despite AZZ's best efforts and extensions granted to the purchaser, Wade Energy Corporation (a private equity purchaser) ("Purchaser"), the sale of the Assets has not completed despite the sale agreement remaining on foot. AZZ is currently considering its options in relation to the Purchaser's failure to complete the acquisition of the Assets;
AZZ has also conducted a sale process for the Assets to identify alternative purchasers. The sale process generated interest from a number of parties and the feedback on the quality of the Assets was positive; and
AZZ is continuing to engage with parties who have expressed an interest in the Assets with the aim of agreeing a sale or joint venture for the Assets."
As a preliminary matter, we note that each of the terms "Notes Repayment Extension" and "Delayed Assets Sale" rolls up multiple items of information, relating to matters which occurred at disparate points in time. The ASX's questions request that the Company provide its opinion as to whether the "information or any part thereof" reflected in those definitions has certain characteristics. Given the manner in which the terms "Notes Repayment Extension" and "Delayed Assets Sale" have been defined, and given the complexity of assessing whether a collection of information (relating to matters occurring at different points in time) hypothetically would be expected by a reasonable person to have a material effect on the price or value of the Company's securities, it is not possible to respond to those questions in a compendious fashion.
As we apprehend the ASX's primary concern is compliance with the ASX Listing Rules regarding continuous disclosure, we have sought to address the questions posed by the ASX by identifying those parts of the "Notes Repayment Extension" information and "Delayed Assets Sale" information which have been disclosed to the market, and when; and if not disclosed, the reasons why disclosure has not occurred. We have also set out the background and circumstances of the Company, as relevant to the Company's response to the ASX Letter.
BACKGROUND
Sale of Northern Star and Big Star AssetsOn 7 September 2015, the Company announced that it had entered into two sale agreements (Sale Agreements) with a private equity purchaser for the sale of its Northern Star asset for US$148,788,560 and Big Star asset for US$105,069,420 (collectively, the Assets), subject to closing adjustments, taxes and frictional costs.
The Company did not release the name of the purchaser of the Assets for the following reasons:
the Company believed disclosing the identity of the purchaser jeopardised the ability to complete the sale of the Assets;
the Company has previously kept the names of purchasers confidential when announcing transactions of a similar nature to the market and has only released the names of the purchaser after completion of such transactions, with no objections being raised by ASX on these previous occasions. This includes the sale of the Company's ownership rights announced on 23 April 2009 (made without disclosing PetroHawk Energy Corporation as the purchaser until after the transaction had completed), the sale of non-core Hawkville interests announced on 19 April 2013 (made without disclosing BHP Billiton as the purchaser until after the transaction had completed) and the sale of the Southern Star assets announced on 27 October 2014 (made without disclosing the name of Breitburn Energy Partners until after the transaction had completed);
disclosing the identity of the purchaser would enable other sellers and intermediaries to contact the purchaser to undertake a transaction with those parties instead, potentially undermining the sale of the Assets for the Company;
as the purchaser is not a listed ASX company, there are no restrictions on it disclosing information to other parties on the status of the transaction. If third parties contact the purchaser directly, they may be able to gain access to non-public information. This non- public information may then be released to the public by third parties and the Company will no longer be able to ensure the information is reported correctly or completely;
as the development and disposal of oil and gas projects is the main undertaking of the Company, the Company would find it difficult to conduct similar transactions in the
future if potential purchasers were of the view that the Company could not keep details of the transaction confidential until completion occurred; and
as the Company operates in a market where private companies are significant purchasers of oil and gas projects, the Company's ability to require disclosure from these parties is severely limited and places the Company at a significant disadvantage to its competitors if the Company is required to disclose detailed information about prospective purchasers while its competitors for the sale of oil and gas projects are not.
The sale of the Assets to the private equity purchaser was originally expected to complete on or before 30 November 2015.
On 9 September 2015, ASX contacted the Company to request the name of the purchaser and further details of the Sale Agreements.
Between 9 September 2015 to 10 September 2015, ASX and the Company were in communications regarding the requests from ASX.
After 5:00pm on 10 September 2015, ASX advised that the Company needed to request a trading halt to consider its response to ASX's requests relating to the name of the purchaser and other information relating to the Sale Agreements.
On 11 September 2015, the Company's securities were placed in a trading halt to allow the Company to consider its response to requests for information relating to the Sale Agreements from ASX.
ASX requested that the Company disclose the identity of the purchaser of the Assets. For the reasons described in paragraphs 6 and 7, the Company did not believe that doing so was in the best interests of the Company as it jeopardised the ability to complete the sale of the Assets.
By 15 September 2015, the Company and ASX were unable to resolve their differences regarding the disclosure of the identity of the purchaser and ASX subsequently suspended the Company's securities from quotation.
In the announcement released by ASX suspending trading in the Company's securities, ASX also noted that the sale of the Assets would require the approval of the Company's shareholders (Shareholders) pursuant to listing ASX Listing Rule 11.2.
On 15 September 2015, the Company released a response to the suspension of quotation of its securities advising that at that time it did not want to disclose the identity of the private equity purchaser of the Assets as disclosing the identity of the purchaser would jeopardise the Company's ability to complete the sale of the Assets.
The directors believed that in accordance with paragraph 4.3 of ASX Guidance Note 16, the suspension of trading in the Company's securities would allow the Company to manage its continuous disclosure obligations where the Company was completing the complex sale of the Assets which was important to the Company's continued financial viability for the reasons described below.
The securities of the Company have remained suspended since 15 September 2015.
Half Year ReportOn 11 September 2015, the Company released its half-year financial report (Half Year Report) for the half year ending 30 June 2015 which disclosed the Company's cash balance as at 31 August 2015 and developments relating to the Company up to the date of the report.
The Half Year Report also contained an emphasis of matter at the conclusion of Ernst & Young's review of the Company's half year accounts. The emphasis of matter drew the market's attention to Note 1 in the Half Year Report of the uncertainty about the Company's ability to continue as a going concern.
Note 1 of the Half Year Report disclosed to the market that:
the Company and its subsidiaries' (Group) had a cash balance as at 31 August 2015 of A$4.5 million;
the Group held listed shares in Breitburn Energy Partners LP (listed on NASDAQ) with a value as at 31 August 2015 of A$17.263 million;
the Group had outstanding liabilities associated with the Notes as at 30 June 2015 of A$47.188 million, with a reset date on 31 October 2015; and
should the holders of the Notes (Noteholders) elect to redeem their Notes, the Group had insufficient cash reserves to fund the redemption of the Notes and continue as a going concern.
As stated in Note 1 of the Half Year Report, the directors of the Company were of the opinion that the financial statements could be prepared on a going concern basis as they believed the announced sale of the Assets would provide the Company with sufficient cash to redeem any Notes if:
The Half Year Report disclosed that if the Company was not able to achieve the matters described in paragraphs 22.1 and 22.2 above, that there was significant uncertainty as to whether the Company could be able to continue as a going concern, unless alternative funds were secured to repay the Notes.
Accordingly, it was clear from the Company's publicly available Half Year Report that there was a risk that the Company may not have sufficient cash reserves to satisfy Noteholder redemptions on 31 October 2015 (depending on how many redemptions were actually received by the Company and the matters described in paragraphs 22.1 and 22.2 above), if that date was not extended.
October 2015 Noteholders meetingOn 8 October 2015, the Company issued a notice of meeting to Noteholders (October 2015 Notice of Meeting) for a meeting to be held on 30 October 2015 (October 2015 Noteholders Meeting) to extend the reset date of the Notes from 31 October 2015 to 31 March 2016.
The October 2015 Notice of Meeting advised that the Company was seeking to extend the reset date for the Notes in order for the Company to assess redemption notices received from Noteholders and progress the sale of the Assets.
While the amendment to the reset date of the Notes would extend the time the Company had to redeem the Notes of Noteholders who had lodged redemption notices with the Company, this did not affect the interest payments on the Notes which the Company was required to make on 30 October 2015 and 29 January 2016.
On 27 October 2015, the Company released an ASX announcement (October 2015 Announcement) providing an update on the sale of the Assets and the number of redemption notices that it had received prior to the October 2015 Noteholders Meeting.
In the 27 October 2015 Announcement, the Company advised that:
Antares Energy Limited issued this content on 22 March 2016 and is solely responsible for the information contained herein. Distributed by Public, unedited and unaltered, on 28 March 2016 11:53:35 UTC
Original Document: http://www.antaresenergy.com/wp-content/uploads/2016/03/2016-03-22-ASX-Aware-Query-Reply.pdf
