Zoltav, the Russia-focused oil and gas exploration and production company, announces that a circular will be sent today to Shareholders detailing the following proposals:

• the cancellation of admission of Zoltav's Ordinary Shares to trading on AIM (the "De-listing");
• a Tender Offer under which ARA Capital Holdings Limited will conditionally offer to purchase 16,762,099 Ordinary Shares held by Qualifying Shareholders at 25 pence per share; and
• the extension of the repayment date of the Loan Facility entered into with ARA Capital Holdings Limited to 28 February 2022.

Additionally, further to the Company's announcement on 29 December 2020 regarding a Share Purchase Agreement between ARA Capital Holdings Limited and Bandbear Limited (the terms of which were amended as per the announcement on 8 November 2021), which was conditional, inter alia, on ARA Capital Holdings Limited obtaining clearance from the Russian Federal Antimonopoly Service, the Company has been notified that such clearance has now been obtained.

Background

Zoltav, in its current form, has been listed on AIM since 2011. The main purpose of the listing was to provide access to capital for investment in acquiring and developing oil and gas assets primarily in Russia, and to provide a trading facility for Shareholders.

Since 2014, the Company's primary operational focus has been the development of the Bortovoy Licence in Saratov, Russia. During that time, the perception of investors in the London market towards junior oil and gas companies, particularly those focused primarily on Russia, has deteriorated and the Company has been unable to attract investment or access funding from the public capital markets. As such, the Company has relied entirely on Russian bank finance, and the support of its Majority Shareholders who own, in aggregate, approximately 88 per cent. of the Company.

Zoltav has no significant UK based institutional investors among its Shareholders and its focus on oil and gas assets solely in Russia, together with the composition of its share register, mean that it is unlikely the business will be able to raise finance through the issue of new shares on AIM, which is one of the primary reasons for being listed.

Given Zoltav's current ownership structure, the Company has a limited free float resulting in low liquidity in the Company's Ordinary Shares. As such, the Company's share price is subject to high volatility and the AIM listing does not generally provide an opportunity for the Company's Shareholders to trade in meaningful volumes. In the event that ARA Capital Holdings Limited elects to convert the Loan Amount under the Loan Facility pursuant to the terms of the Loan Facility in full the free float would be expected to reduce to approximately 8 per cent.

The Directors do not believe these factors are likely to significantly improve in the foreseeable future.

Notwithstanding this, the Directors have sought to maintain the Company's listing on AIM to provide a trading facility for Shareholders for as long as practicable. However, the project finance facilities entered into by the Company's main operating subsidiary, Diall Alliance, in October 2021 contain conditions which restrict intra group transfers and cash outflows from Diall Alliance to the Company. Without project finance or alternative sources of capital, Diall Alliance would have been unable to service its loans beyond the end of 2021.

In light of the restrictions on intra group transfers, and having explored alternative options to finance the Company, the Directors have concluded that it is highly unlikely the Company will be able to maintain its financial obligations with respect to the Company's AIM quotation on an ongoing basis.

The Directors estimate there are at least US$ 0.5 million per annum of costs directly associated with the listing. This is significant given the Company's current financial position and these funds could be better invested in the development programmes and production improvements that are the basis for the future of the business. For the foreseeable future, the considerable cost, management time and the legal and regulatory obligations associated with maintaining the Company's admission to trading on AIM are materially disproportionate to the benefits to the Company, especially in the context of the small executive team.

For the reasons outlined above, the Board is of the view that the considerable cost, management time and the legal and regulatory obligations associated with maintaining the Company's admission to trading on AIM significantly outweighs the benefits of a public quotation.

KeyFacts Energy: Zoltav Resources Russia country profile