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Extraordinary General Meeting of 23 October 2017
Report of the Board of Directors relating to the exclusion of Pre-emption rights
 
1. Purpose of the Report
This report has been prepared and is being submitted by the Board of Directors of SeaBird Exploration Plc (the “Company"), pursuant to the provisions of section 60B of the Cyprus Companies’ Law, Cap. 13, as amended (the “Law"), in order to support the proposal for the approval by the shareholders, at the extraordinary general meeting to be held on 23 October 2017, at 11.00 a.m., of an exclusion of pre-emption rights, in connection with the proposed authorization to issue up to 15,692,544,855 additional ordinary shares in the Company.
The approval being sought, if granted, will remain in force until 30 June 2020. 

2.  Background 

2.1 The Company has been in a difficult financial situation and has entered into  arrangements for the restructuring of its debts and liabilities. 

2.2  At an extraordinary general meeting held on 13 June 2017, the shareholders’ approved a  restructuring of the Company’s debt and the conversion of part of the Company’s  indebtedness into equity.

2.3  On 31 July 2017 the Board of Directors issued 54,389,711 additional shares in the Company  to some of its creditors, as partial conversion of its indebtedness into equity.

2.4  At an extraordinary general meeting held on 17 August 2017, the shareholders resolved that the authorized share capital of the Company be increased from US$ 6,800,000.00 to US$ 16,800,000.00 divided into 168,000,000 shares of a nominal value of US$ 0.10 each, for the purpose of securing additional funds to cover the Company’s immediate financial needs through the issue of further equity.

2.5 At an Extraordinary General Meeting of the Company held on 2 October 2017, the authorised share capital of the Company, previously in the amount of US$16,800,000.00 divided into 168,000,000 ordinary shares of US$0.10 each, was divided into (a) 157,500,000 ordinary shares of a nominal value US$0.1 each, and (b) 1,050,000,000 Class A Shares, of a nominal value of US$0.001 each. The shareholders authorised the board of directors to issue and allot the Class A Shares and waived their pre-emption rights.

2.6 The company has carried out a private placement of 1,000,000,000 Class A Shares in the Company, each with a nominal value of USD 0,001, at a subscription price of NOK 0.10.

3.  Purpose and justification for the proposal

3.1 The Board of Directors proposes and is considering the following two possible methods of  raising funds through the issue of further equity:

(a)  Offering of further shares to existing shareholders.
(b)  Offering of further shares to other investors. 
 
3.2  The fundamental purpose for providing the Board of Directors with the authority to issue shares is to enable the Company, acting through its Board of Directors to utilize opportunities that arise in the marketplace, as they arise. This could take place in the form of mergers and acquisitions, refinancing, purchase of assets etc., in addition to incentivizing management and similar. An exclusion of the pre-emption rights of the existing shareholders would provide the Board of Directors with the required flexibility and the ability to use any of the above-mentioned methods of raising funds, in addition to the ability to act quickly when circumstances dictate that this is in the interests of the Company.  It is therefore in the interest of all shareholders and other stakeholders, considering all options available to the company, to provide the directors the flexibility needed to act promptly and to be instantly responsive towards the opportunities that might arise.
Not excluding pre-emption rights would impact the process of attracting funds needed by the Company quickly. The Board of Directors considers, under the current circumstances that, while due consideration to the interests of all shareholders and other stakeholders will be taken into account when determining the structure of a potential equity raise, it would neither be prudent nor in the interest of the shareholders to disregard any opportunity that might arise.

4.  Issue Price
As a formal matter, the nominal value of any share would be the minimum price at which a new share may be issued. In practice, the issue price in any equity transaction in the Company, regardless of structure, will be based on negotiations with the relevant investors and/or guarantors. Such negotiations will ordinarily be taking their basis in the listed price of the shares of the Company on the marketplace at the relevant time, and factoring in other relevant factors. The Board of Directors considers that the fixing of the price for the issue of any shares through concrete negotiations with a broad number of relevant prospective investors or guarantors based on the market price of the Company’s shares is the most reasonable and realistic method of fixing said price, as this is the price at which any prospective investor would likely be willing to buy. The Company is seeking to achieve the best price achievable for any new shares to be offered under any structure, under the prevailing market conditions.

Annette Malm Justad
Chairperson
On behalf of the Board of Directors