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Natlata Addresses Misleading Petroneft Board Claims

LONDON, April 3, 2014 /PRNewswire/ --



Natlata Partners Limited ("Natlata"), the private investment company that is the largest single shareholder in Petroneft Resources PLC ("Petroneft" or "the Company") (AIM: PTR) has had a chance to examine the circular that the Board of Petroneft("the Board") released with the notice for the EGM to be held on 9 May 2014.  Natlata intends to send its own letter to shareholders in the coming week setting out why major changes at Petroneft are necessary if the company is to prosper. However the Board has made a number of inaccurate or misleading statements in its circular that need to be rectified without any further delay.

To begin with, the Board refers to the "current board of directors having been appointed by you, the Shareholders."

·     What the Board does not say is that the only shareholders who have voted to appoint the Board members that we propose to replace are the Board members themselves.

·     Since at least 2011, it would appear from the minutes provided to Natlata by the Company that no shareholder, outside of the current Board of Directors, has ever cast a single vote in favour of these Board members, or that, in fact, no shareholder besides the Board members has voted on any other Company related matter either.

The Board has claimed that Natlata put forward two proposals "whereby it would acquire a controlling shareholding in Petroneft without paying Shareholders a fair price for obtaining control of the Company. These proposals have been considered by the Board together with its advisers and are deemed not to be in the best interests of the Company and of the Shareholders as a whole." In fact:

  • As things stand now, the Company is, in practice, controlled by shareholders whose combined shareholding amounts to about 8%.
  • The Board neglected to mention why the first proposal, which envisaged transferring the Macquarie debt and issuing 10% new shares, was set at 3.82p a share.  This was the average trading price for the prior twelve months. This represented a premium of 52.8% over the shareprice of 2.5p last summer, before Natlata started building a notifiable stake, which long suffering investors will remember all too well.
  • The Board claims to have a number of questions about the terms and financing of the proposals, yet it never asked for a single clarification from Natlata either by phone, email, letter or in person.
  • An examination of Natlata's second proposal would have seen that:
  • based on our estimate of US$9.9m remaining Macquarie debt, conversion of this debt would represent a dilution of approximately 15%. It would increase Natlata's total shareholding in Petroneft to ca. 26.1% and therefore not trigger a mandatory offer.  The proposed farmout is equivalent to 50% dilution of shareholders  
  • it would have resolved the most urgent financial problem, namely capex and debt servicing
  • the proposed additional $10 million placement would be open to all shareholders and not the select few insiders who were invited to participate in the recent stealth placing carried out recently by Petroneft
  • the Board called Natlata's 5.5p per share offer unfair whilst they apparently considered 5p per share a "fair price" in their recent stealth placing.

The Board refers a number of times to discussions concerning refinancing with a large number of parties as well as seeking options for a farmout of Licence 61. However it neglects to give any substantive details of any of the options, including that of the farmout currently being discussed with the unknown "large international oil and gas company." It also states that "The planned farmout of 50 per cent. of Licence 61 is more attractive for Petroneft and significantly less dilutive for other Shareholders."

This is misleading and raises a number of further questions:

  • Natlata's offer would lead to a maximum 25-27% dilution including Natlata itself.  How can the Board say that their proposal, such as it is known, is better, as it will result in a practical dilution of almost 50% with the farmout in addition to the 10% dilution already executed by the board in their stealth placing.
  • They give no details of the identity of the proposed partner.  What expertise do they have? Have they ever worked in Russia?

Commenting on the Board's circular, Maxim Korobov, Natlata's controlling shareholder, said, "The Board makes a number of untrue statements and raises questions about Natlata's corporate governance and yet it does not feel that shareholders should have any say on a deal that will result in a fundamentally different company. They are asking shareholders to trust a Board that has already spent approaching $200 million of shareholders' money, with little to show for it. We have no trust in the management's unbiased and competent decision making capability.  That is why we think that all shareholders should have the opportunity to decide on what's best for their Company."

About Natlata Partners Limited

Natlata Partners is a private investment company that seeks out investments with a focus on Russia and CIS countries that appear to be distressed or are at an early stage of development and which will clearly benefit from effective management and proven sector experience.  For more information about Natlata and our investments please contact [email protected].  More details on our proposals for Petroneft can be found at http://www.value4petroneft.com.

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