(Administrators Appointed) (EPL) Second Meeting of Creditors 27 - - PowerPoint PPT Presentation

Elk Petroleum Limited (Administrators Appointed) (EPL)

Second Meeting of Creditors

27 September 2019

• Introduction

– Meeting formalities and overview of voting process – Purpose of meeting

• Administrators’ Report

– Voluntary Administration timeline – Administrators’ actions to date – The Voluntary Administration and reasons for failure – Elk Group financials – Investigations – Proposed Deed of Company Arrangement – Expected return to creditors

• Administrators’ recommendation
• Questions
• Resolutions

Agenda

• Open meeting
• Administrator is Chairperson: IPR 75-50
• Introductions:
• Jason Preston (Administrator and Chairperson)
• Jonathan Henry (Partner, McGrathNicol)
• Scott Rogers (McGrathNicol)
• Attendance register
• Quorum: IPR 75-105
• Time and place convenient: IPR 75-30
• Administrators’ report to creditors pursuant to IPR 75-225 (the Administrators’ Report)
• Proofs of debt and proxies
• Updated Declaration of Independence, Relevant Relationships and Indemnities (DIRRI)
• Voting

Meeting formalities

Voting

Show of hands Each creditor/proxy holder in the room gets one vote, regardless of how many proxies held When more creditors/ proxy holders vote for it than vote against it On your voting slip, tick “In favour of” or “Against”, add your name and (for proxy holders) the creditor you represent Hand voting slip to Administrators’ staff General proxies: fill in a voting slip for each general proxy you hold Special proxies: we already have your creditor’s vote (provided in advance or at sign-in) When more creditors (either in the room or via proxy) vote for it than vote against it AND When those who vote for it are more than those who vote against it OR, IF EITHER OF THE ABOVE (BUT NOT BOTH), when the Chairman exercises a casting vote in accordance with IPR 75-115

On the voices By poll

How to vote Voting via proxy How the resolution is passed

Creditors of EPL to resolve one of the following:

Purpose of meeting

EPL be returned to the Directors EPL enter into a Deed of Company Arrangement (DOCA) EPL enter liquidation Creditors of EPL may also resolve that the meeting be adjourned for a period of up to 45 business days

Voluntary Administration timeline

12 June Extension of the convening period granted 8 July Non-binding indicative offers due 27 September Second Meeting

• f Creditors

20 September Administrators’ report issued and DOCA Term sheet received 3 June EOIs due 15 May VA appointed 27 May Advertised for expressions of interest 3-14 June Negotiations with interested parties 27 May First Meeting of Creditors 21 August Initial DOCA Proposal received 1 July Data room access and due diligence commencement Today

Administrators’ actions to date

• bligations

• perations

Reasons for failure

The Administrators do not dispute the Directors’ views in relation to the reasons for EPL’s failure Delayed and lower than forecast production from Grieve Decrease in oil pricing Tightening of capital markets Misapplication/misallocation of Aneth loan funds High general and administrative costs AB’s share conversion Restriction of the repatriation of funds from EPI to EPL

• (133)

• 50

Elk Group Statement of Financial Performance

Consolidated statement of financial performance

• (4,544)

• (24,536)

• Loss after income tax expense

Revenue for FY18 increased by US$90.1m due to the Aneth acquisition Finance costs of the Elk Group increased by US$20.5m due to increased borrowings to fund losses and the acquisition of Aneth Falling oil prices resulted in losses on unfavorable derivative positions, impairments and fair value adjustments of operating assets.

Composition of borrowings

Consolidated statement of financial position

• (40,751)

• (62,355)

Elk Group Statement of Financial Position

• 100

• 10.0

EPL operating cash flows and funding

EPL net costs of $5.9m to

• perate over 12 months

reviewed Debt and equity raised to fund EPL costs and to fund US Subsidiaries Non-cash impairment of intercompany loans made to US Subsidiaries

Investigations

Potential claims that may be available in a liquidation

Director Defences Significant litigation and delay risk Insolvent trading Voidable transactions Discharge of Directors’ duties

Considerations and defences

Business judgement rule

Proposed Deed of Company Arrangement

DOCA Proposal

Deed Proponents Neale Taylor and Timothy Hargreaves Deed Funder Republic Investment Management Pte Ltd Deed Administrator Giles Geoffrey Woodgate

• f Woodgate & Co

‘Holding’ style of DOCA $710,000 contribution from Deed Funder No return to unsecured creditors. claims are not compromised Priority employees are expected to be paid in full

• The purpose of the Proposed DOCA is to provide an opportunity to pursue a

recapitalisation proposal for EPL during the DOCA period (up to a period of 14 months from the effective date).

• If a recapitalisation proposal is secured, it is intended that the Proposed

DOCA be varied to facilitate that proposal.

• The claims of ordinary unsecured creditors will not be released, discharged

and extinguished by the Proposed DOCA.

• The Proposed DOCA will terminate when one of the following events occur:
• The Court makes an order terminating the Proposed DOCA;
• Creditors pass a resolution terminating the Proposed DOCA; or
• The Proposed DOCA has not been amended within 14 months following

the commencement date and EPL shall automatically be wound up. Directors are not released Republic takes security over the assets of EPL

Shareholders

Outcomes

Priority employees Ordinary unsecured creditors

• Nil. Employee would need to

access FEG

• Nil. Possibility of value being

restored Nil Nil

DOCA Liquidation

100 c/$

• Nil. Claims are not compromised

Options available to creditors

• Facilitates receipt of the DOCA Fund from Deed Funder which would not otherwise be available in a liquidation.
• Proposed DOCA is expected to facilitate a 100 cent in the dollar return to priority employees without employees accessing government

support scheme (FEG)

• Unsecured claims are not compromised

EPL be returned to the Directors EPL enters into a DOCA EPL enters liquidation

• Not a viable option
• EPL remains insolvent
• No access to funding
• Distribution to unsecured creditors unlikely and subject to further investigations (funding required)
• Inferior return for employees as compared to the DOCA

Administrators’ Recommendation

Enter into a DOCA as it provides an estimated 100 c/$ return to employees and an

• pportunity for the Proponents to explore recapitalisation options which may

provide a return to ordinary unsecured creditors which is unlikely in a Liquidation alternative

Q & A

Voting

Show of hands Each creditor/proxy holder in the room gets one vote, regardless of how many proxies held When more creditors/ proxy holders vote for it than vote against it On your voting slip, tick “In favour of” or “Against”, add your name and (for proxy holders) the creditor you represent Hand voting slip to Administrators’ staff General proxies: fill in a voting slip for each general proxy you hold Special proxies: we already have your creditor’s vote (provided in advance or at sign-in) When more creditors (either in the room or via proxy) vote for it than vote against it AND When those who vote for it are more than those who vote against it OR, IF EITHER OF THE ABOVE (BUT NOT BOTH), when the Chairman exercises a casting vote in accordance with IPR 75-115

On the voices By poll

How to vote Voting via proxy How the resolution is passed

Resolution – Voluntary Administration remuneration

“That the remuneration of the Voluntary Administrators for the period 15 May 2019 to 30 August 2019, calculated at hourly rates as detailed in the Initial Remuneration Notice dated 20 May 2019, is determined in the sum of $289,757.50, exclusive of GST.” “That the future remuneration of the Voluntary Administrators from 31 August to 27 September 2019 is determined at a sum equal to the cost of time spent by the Administrators and their partners and staff, calculated at the hourly rates as detailed in the Initial Remuneration Notice dated 20 May 2019, up to a capped amount of $45,242.50, exclusive of GST.”

Remuneration resolutions

Current remuneration approval being sought Amount (excl. GST) Retrospective remuneration approval 289,757.50 Prospective remuneration approval 45,242.50 Total Remuneration 335,000.00

The gross professional time costs for the period of 15 May 2019 to 30 August 2019 totalled $422,659.50. The Administrators have undertaken a fulsome review of staff timesheets and have removed 338.1 hours or $132,209.00 from the recorded timesheets for the purposes of this remuneration report. The time incurred but withdrawn from this remuneration report reflects 34.5% of the total professional time costs incurred. Additionally, our future fees are expected to be $75,000 and have capped our future fees at $45,242.50.

Resolution – Deed of Company Arrangement

“That Elk Petroleum Limited (Administrators Appointed) executes a Deed of Company Arrangement and Giles Geoffrey Woodgate of Woodgate & Co be appointed the Deed Administrator.”

Q & A

Resolution – Enter into liquidation

“That Elk Petroleum Limited (Administrators Appointed) be wound up, with Jason Preston and Barry Kogan being appointed as Joint and Several Liquidators.”

Resolution – Committee of Inspection

“That a Committee of Inspection of Elk Petroleum Limited (In Liquidation) be formed and that: _______________ _______________ _______________ _______________ be appointed to the Committee of Inspection of Elk Petroleum Limited (In Liquidation)”.

Resolution – Committee of Inspection

“That despite the operation of IPS 80-55, members of the Elk Petroleum Limited (In Liquidation) committee may directly or indirectly derive a profit or advantage from the external administration of the company if the profit or advantage is derived in the ordinary course of trading the business”

Resolution – Enter into Agreements

“That the Liquidators are authorised to enter agreements on behalf of Elk Petroleum Limited (In Liquidation) that may take longer than three months to complete under Section 477(2B) of the Act.”