EnCore Oil plans for exploration assets flotation under XEO Exploration

EnCore announces that it is planning for a subsidiary company, which will be assigned the Exploration Assets, to be floated on AIM. The new company will be known as XEO Exploration plc. Subject to regulatory approvals and a successful institutional placing, XEO is expected to be admitted to AIM around the end of May 2011. EnCore is in the process of transferring the Exploration Assets listed below into XEO, subject to receiving the necessary partner and regulatory approvals. The exact percentage shareholding of EnCore in XEO will depend upon the final amount of funds raised by XEO.

In addition to their indirect interest in XEO through EnCore’s remaining holding, the company plans to offer qualifying EnCore shareholders the opportunity to subscribe for shares in XEO directly at the institutional placing price. The offer to EnCore shareholders will be made around the time of XEO’s admission to AIM and close shortly following admission.

In addition to the licences above, XEO has the potential option to acquire a number of UK26^th Round licences, yet to be awarded by DECC, that are under further environmental review.

Rationale behind the flotation

The EnCore Board has considered a number of scenarios for progressing the exploration portfolio and has concluded that placing those assets into a separately quoted company is the most beneficial route forward for the following reasons:

• EnCore’s future focus is now to be directed towards its two main assets, Catcher and Cladhan, which are in the latter stages of appraisal and will soon be moving into the development stage of their lifecycles.
• A very significant proportion of the value of the company is in Catcher and Cladhan. Therefore, the Board did not wish to dilute shareholders’ exposure to these assets by an EnCore fundraising for a high-impact exploration programme covering the Exploration Assets with the attendant risks.
• Moving forward, EnCore’s existing and any future capital/debt can be targeted directly at the development assets.
• Existing EnCore shareholders will remain exposed to any success from the Exploration Assets through EnCore’s shareholding in XEO. However shareholders who wish to have increased exposure to a risked exploration programme will also be offered the opportunity to participate in the offer at the institutional placing price.