By Amy McLellan
Twelve months on from its demerger from Leyshon Resources, and Chinese gas explorer Leyshon Energy is planning to return more than US$15 million in cash to shareholders and cancel its AIM listing.
It follows a run of poor results from its Zijinshan project in China and the failure to bring in partners or identify other opportunities against a backdrop of uncertainty and price volatility. Shareholders will vote on the proposals at the end of this month.
As we reported last month, the company initiated a strategic review to consider its options. Beijing-based Leyshon isn’t short of cash – it has cash of US$24.6 million against estimated liabilities of between US$8.6 million and US$9.3 million – but it is opportunity poor after mixed results from the Zijinshan block on the eastern fringes of the Ordos Basin and the slump in the oil price rendered other target opportunities marginal.
Against this backdrop it makes sense to cancel the listing to preserve cash – including associated Directors’ and professional advisers’ fees, this costs around £500,000 per annum – and to return funds to shareholders.
It is currently estimated that such cash distribution will be around US$15.4 million, or around 4.1 pence per share. The cancellation of the AIM listing is proposed for February 10. The company will then adopt a simplified Memorandum and Articles of Association and go into hibernation as a shell company.
Once all liabilities have been settled, there will be general meeting at which shareholders will be asked to consider winding-up the company or any alternative business proposal. If the company is wound up, the appointed liquidator will make a final distribution of any residual cash.
It’s a disappointing end to a company that had hoped to push ahead with unconventional gas in China’s Ordos basin but, as we have seen too often on AIM, there are worse outcomes for shareholders than having a cash distribution.
Indeed, analyst Malcolm Graham Wood of Hydrocarbon Capital said this was “probably the best bet for now” and suggested investors keep an eye out on what the management team does next “as pound for pound it has one of the most experienced groups of industry guys I have seen for a while”.
This includes ex BG executive Kim Howell, who was appointed non-executive chairman in November after former chair John Manzoni stepped down following his appointment as the first ever chief executive of the Civil Service of the British Government
MD Paul Atherley is a former senior investment banker with HSBC while non-executive director Tony Megg has more than 30 years in the oil and gas industry, most recently serving as executive VP for Talisman and before than as group VP of BP, where he was head of group technology until 2008.