THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION FOR THE PURPOSES OF ARTICLE 7 OF EU REGULATION 596/2014 (WHICH FORMS PART OF DOMESTIC UK LAW PURSUANT TO THE EUROPEAN UNION (WITHDRAWAL) ACT 2018). UPON THE PUBLICATION OF THIS ANNOUNCEMENT, THIS INSIDE INFORMATION IS NOW CONSIDERED TO BE IN THE PUBLIC DOMAIN.

29 November 2023

ADM Energy PLC

("ADM" or the "Company")

Energy Technology Investment

ADM Energy PLC (AIM: ADME; BER and FSE: P4JC), a natural-resources investing company, is pleased to announce that, in line with its Investing Policy and its announcement of 14 November 2023, it has made a further investment in an energy technology company focused on providing technology solutions to the upstream sector of the U.S. oil and gas business.

Highlights

·    Acquisition of approximately 53.1% economic interest in OFX Technologies, LLC ("OFXT") 100% owner of Efficient Oilfield Solutions, LLC, a revenue generative, technology company focused on delivering technology solutions that increase efficiency, lower costs and aid in the management of regulatory requirements of the U.S. upstream oil and gas industry ("the Investment")

·    Total Maximum Consideration of US$1,285,000 comprised of the issue of 86,035,489 new ordinary shares at 1p each; 39,959,017 3-year, 1p warrants and US$235,000 in cash. 

·    The Total Maximum Consideration implies a value of OFXT of approximately US$2.3 million or 4.5x the annualised monthly recurring revenue target of OFXT for the end of Q1 2024.

·    This oilfield technology investment positions the Company to take advantage of the rapid growth in technology spending by the upstream industry. Barclays cited in an article from Oilprice.com in April 2023 estimated upstream technology spending at US$30 billion by 2025, up over 6x from 2020 levels.

·    Subscription of US$225,000 of the amended Secured Convertible Loan Notes (as announced on 14 November 2023) and US$10,000 previously funded by the Company will fully fund the Company's cash commitments associated with the investment.

·    The investment is consistent with the mandate of new non-executive Chairman Lord Henry Bellingham to position ADM with investments focused on technologies related to the energy industry in addition to the more traditional investments in oil and gas production that the Company has historically pursued.

Investment Summary

The Company has acquired 650,000 Class A Units of OFXT from OFX Holdings, LLC ("OFXH"), a substantial shareholder of the Company.  In addition, the Company acquired 150,000 Class A Units in OXFT from parties unrelated to OFXH and directly subscribed for 120,000 Class A Units and 200,000 Class B Units from OFXT (together "the Transactions"). 

The result of the Transactions is that ADME, upon completion, will hold 920,000 Class A Units and 200,000 Class B Units of OFXT representing approximately 53.1% of the economic interest of OFXT.

Total consideration for the investments is US$1,285,000 comprised of (i) the issue of 86,035,489 new ordinary shares at a price of 1p per share (the "Consideration Shares"); (ii) US$235,000 in cash and (iii) 39,959,018 3-year, 1p warrants.  The Company has the option, at its sole discretion, to purchase an additional 100,000 Class A Units at US$1.50 per Unit or US$150,000 on or before February 28, 2024.  Additionally, ADM will issue a total of 16 million incentive warrants to the management team and other key persons of OFXT (the "Incentive Warrants"). 

Of the Total consideration associated with the investment, US$975,000 is to be paid to OFXH, a substantial shareholder of the Company.  OFXH will be issued 79,918,033 ordinary shares and 39,959,018 3-year, 1p warrants.  Adjusted for the issuance of shares to OFXH, OFXH will hold 82,469,367 ordinary shares representing 17% of the enlarged share capital of the Company.

Concurrent with the oilfield technology investment, ADM has accepted a subscription for US$225,000 gross proceeds of its amended 15% secured convertible loan notes with an equity conversion price of 1p per share.  The Secured Convertible Loan Notes will only be issued upon funding and the proceeds will be used to fund the Company's cash commitments associated with the OFXT investment.  No commissions or fees were paid in relation to the subscription which will result in net proceeds to the Company of US$235,000. 

OFX Technologies, LLC (www.ofxtechnologies.com)

OFXT owns 100.0% of the membership interest of Efficient Oilfield Solutions, LLC, a revenue generating Louisiana limited liability company ("EOS") which currently offers a free to download mobile phone app supported on both iOS and Android platforms that is used to track and manage produced water resulting from oil and gas operations and to fulfil regulatory requirements associated with the disposal of oilfield waste-water in the State of Louisiana as well as data storage requirements necessary to comply with state regulations.  EOS's business model is to provide Software-as-a-Service ("SaaS") with a near-term focus of expanding its service offering to other U.S. states and add additional functionality to increase average revenue per user. 

OFXT's near-term business plan is focused on:

1.    Releasing user "Dashboards" which will provide users with data analytics to better plan, lower costs and increase efficiency associated with logistics, storage and disposal of produced water.

2.    Completing its "E-Ticketing" solution which will streamline and increase efficiency in the management of trucking operations.  Release of the E-Ticketing solution is an important milestone and the starting point for marketing efforts to large commercial users of the platform.

3.    Expand into the Texas market, Texas is the largest oil producing state in the United States.

4.    Evaluate joint venture and cross sale opportunities with other SaaS providers to leverage capabilities without requiring substantial capital investment.

5.    Explore opportunities to integrate blockchain, artificial intelligence and internet-of-things (IoT) technologies to allow users to improve collection, management, analysis and application of data that can improve operations, lower costs and automate regulatory compliance.

OFXT is led by Mr. Thomas Bower, Chief Executive Officer, who has spent over 20 years in the Defense, Oil and Gas, and Commercial Real Estate Industries, primarily focused on technology or efficiency initiatives. Mr Bower's strengths include building robust teams, streamlining processes, and integrating technology to maximize an organisation's effectiveness. Mr. Bower has a Bachelor's in Accounting from Strayer University, a Masters of Intelligence Analysis from Johns Hopkins University, and a Masters of Business Administration from The University of Notre Dame.  Mr Bower is a Veteran of the United States Army and resides in Houston, Texas. 

Market Opportunity

According to the Texas Railroad Commission (which regulates oil & gas in Texas), approximately 10 barrels of salt-water are produced for each barrel of oil production.  With more than 12.6 million barrels per day of crude oil production (per U.S. Energy Information Administration), the U.S. oil industry must manage in excess of 120 million barrels (5+ billion gallons) of waste-water each day.  Oil producing states currently regulate the disposal of produced water to protect the environment and the general trend continues to be towards greater regulation.  Greater regulation required of operators, transportation companies and water disposal companies results in lost time, less efficiency and increased costs.

In an oilprice.com article from 30 April 2023, "How New Technology Will Disrupt the Oil and Gas Industry", author Alex Kimani states: "Barclays estimates that the upstream market digital services industry will grow from less than $5 billion in 2020 to a more than $30 billion annual tab by 2025, thus enabling $150 billion in annual savings for oil producers. Opportunities for cost savings include cutting capital expenditures (CAPEX) as well as selling, general and administrative (SG&A) costs and transportation operating costs."

Application of Investing Policy

The Investment is in-line with the Investing Policy of the Company which states:  "The Company will seek to invest in opportunities within the natural resources sector, the oil services, power and energy sectors and in technology opportunities related to these sectors that the Directors believe either are of strategic value or represent a significant value opportunity. The Company is prepared to take an active role in its investments where it is deemed to be appropriate."

Rationale for Undertaking the Investment

In undertaking the Investment the Board of Directors of ADM have paid special attention to the following considerations:

1.    The combined oil and gas experience of the Directors, its major shareholders and U.S. partners give it a solid basis to understand the changes and initiatives driving growth in technology spending and associated business potential in the United States.

2.    The well documented and rapid growth in technology spending by upstream oil & gas companies creates a favourable environment and opportunistic time for the Company to have exposure to energy technology.

3.    The Directors believe that within its area of focus in upstream Exploration and Production (specifically the transportation, tracking and disposal of produced water), OFXT has a legitimate early-mover advantage and the potential to strongly position in a significant geographic area which will make it an attractive acquisition target for larger companies seeking to establish a strong market position in the U.S. upstream technology space.

4.    The Directors believe that the senior management of OFX Technologies, LLC are highly knowledgeable, motivated and capable of executing the business plan of OFXT.

5.    The Directors believe that the valuation is attractive at 4.5x estimated Q1 run-rate recurring revenue and a little over 3x estimated recurring revenue for the full-year 2024.  In making this determination the Directors considered the following:

a.    The Board of Members of OFXT has established two performance milestones for 2024:

i.  Achieving a monthly sales level in the first quarter consistent with US$500,000 per year in annual recurring revenue; and,

ii. Achieving a monthly sales level before the end of the year consistent with US$1 million+ in annual recurring revenue.

Achieving the two performance milestones will directly impact the 2024 compensation of CEO Tom Bower.

b.    A business valuation by The Vant Group of Dallas Texas was commissioned by the Company as part of its due diligence and indicated an estimated private company value of approximately US$2.4 million based on a sales growth profile of US$184,000 for the full-year 2023 and $702,000 for the full-year 2024.

c.     Through the middle of November 2023, OFXT has reported unaudited cash receipts from customers of approximately US$156,000 with a growth trajectory since appointment of Tom Bower as CEO that the Directors believe is consistent with the 2023 sales forecast used in The Vant Group analysis.

d.    OFXT has provided a detailed schedule to the Directors of near-term sales growth driven by existing clients expanding usage of the platform or new clients be "on boarded" to the platform that it expects to add incremental monthly recurring revenue in excess of US$21,000+ per month by end of Q1 2024.

e.    The Directors note that publicly available information suggests value multiples of annual recurring revenue for growing public SaaS companies have historically tended to be in a range of 6x to 8x annual recurring revenue.

Investment Structure

OFX Technologies, LLC Capital Structure Description

OFX Technologies, LLC is a limited liability company ("LLC") formed under the laws of the State of Texas.  An LLC is a form of business organisation that combines the limitations on liability to its owners of a corporation with "pass through" tax treatment of a partnership (the LLC itself is not subject to state or federal income tax) and the structuring flexibility of a partnership.  The equity interest of a limited liability company is referred to as "membership interest" and in place of shares, ownership is represented by "units".  An LLC can have more than one class of units.  In the case of the Class A Units of OFX Technologies, the Class A Units are intended to provide a preferential return to holders (typically the investors providing capital) prior to significant distributions to other parties.  The Class B Units typically represent an incentive interest.  The Class A and Class B Units split future distributable cash based on the Class A Units achieving certain payout thresholds.   

The Class A Units of OFXT each have one (1) vote per Unit, will receive 85.0% of the distributable cash of OFXT until each Class A Unit has been paid cumulative distributions equal to US$1.50 per Unit.  Thereafter, the Class A Units will receive 70% of distributable cash.  The balance of distributable cash will be paid to the Class B Units which are non-voting units. 

Adjusted for the terms of the investment, OFXT has 5,000,000 Class A Units Authorised; 2,000,000 Class A Units approved for issuance and 1,720,000 Class A Units issued. OFXT has 500,000 Class B Units authorised and 390,625 Class B Units issued.  The Class A Units authorised but not issued are approved for use in future fundraisings and the Class B Units authorised but not issued are reserved for issuance at the discretion of OFXT's Board to future employees or other parties associated with incentive compensation packages. 

As a result of the Transactions, ADME will be interested in 920,000 Class A Units (representing 53.49% of the Class A Units) and 200,000 Class B Units (representing 51.20% of the Class B Units).

ADM has the right, at its sole discretion, to direct OFXT to issue an additional 25,000 Class B Units to directors or employees as part of incentive compensation.  The remaining Class B Units are reserved for issuance to future employees of OFXT by the Board of OFXT as part with incentive compensation programs.

Total Consideration

The Total Consideration of the Transactions is US$1,285,000, using an effective exchange rate of US$1.22,  consisting of share consideration of the issue of 86,035,489 new ordinary shares at a price of 1p per share of ADM Energy plc  Additionally, OFX Holdings will receive 39,959,018 3-year, 1 p warrants and US$75,000 will be paid in consideration to two other parties.  In addition to the interests acquired from third-party sellers, the Company will acquire 120,000 newly issued Class A Units from OFX Technologies, LLC by making cash investments totalling US$160,000.00 with proceeds to be paid directly to OFXT to use to fund software development and general working capital.  The following table summarizes the share, warrant and cash consideration associated with the investment.

Summary of OFXT Interests Acquired

Future Capital Requirements of OFXT

OFXT expects to fund future capital requirements from private U.S. investors through sale of 280,000 authorised and unissued Class A Units.  ADM has the option, at its sole discretion, to acquire an additional 100,000 Class A Units at US$1.50 per Unit until February 28, 2024.  The Company may also, but is not required to, purchase additional Class A Units in the future on terms to be agreed to by and between OFXT and ADM.  If OFXT places the remaining 280,000 authorized and unissued Class A Units to private investors and ADM does not exercise its option or participate, ADM's economic interest will decline to approximately 46.8% from 53.1% at Closing.

Issuance of Incentive Warrants

As an incentive and to align the interests of the senior management and other key parties of OFXT with ADM Energy plc, the Board has authorised the issuance of 16 million incentive warrants to employees or other key persons of OFXT.  The warrants will vest immediately on closing of the investment. The Incentive Warrants will have a 3-year term and are exercisable at a price of 1p per share. The Incentive Warrants will be issued as follows: 4 million to Mr. Thomas Bower and 2 million each to six other key persons affiliated with EOS. 

Participation of Certain ADM Energy plc Directors and Employees in OFXT Class B Units

As part of his compensation for serving as a director of OFXT to represent the interests of the Company, Mr. Stefan Olivier will be awarded 25,000 Class B Units by the board of OFXT. Mr Olivier's position will not otherwise be remunerated.  Additionally, ADM has reserved 25,000 Class B Units for future issue, at direction of the Board of ADM Energy plc, to certain directors or employees of ADM as part of incentive compensation programs.  If assigned, the purpose of the participation is to incentivise management performance in proactively enhancing the value of the investment for the benefit of all shareholders. When issued, the Class B Units will vest immediately in full.

Advisory Fee

Ventura Energy Advisors, LLC, ("VEA") a related party of OFX Holdings, LLC, is to be paid a £50,000.00 structuring and advisory fee ("M&A Fee") in conjunction with its services related to the investment transactions described above, will serve as the exclusive advisor to the Company related to other energy technology investments for a period of two years and will be paid an Exit Fee of 3% of proceeds received by the Company on its exit (including sale, spin-off or listing) from the OFXT investment.

Further Creditor Settlement

Further to the RNS dated 14 November 2023, Financing Update and Debt and Asset Restructuring, the Company has settled one additional creditor in the amount of US$15,000.00 through the issuance of 1,229,508 ordinary shares (the "Settlement Shares") at a nominal value of 1p per share based on an effective exchange rate of United States Dollars to British Pound Sterling of 1.22.

Related Party Transaction

The acquisition of the holding of OFXT shares from OFXH and the payment of the advisory fee for VEA constitutes related party transactions for the purposes of AIM Rule 13. With the exception of Stefan Oliver and Claudio Coltellini, the Company's Directors consider, having consulted with the Company's nominated adviser, Cairn Financial Advisers LLP, that the terms of the transaction are fair and reasonable insofar as the Company's shareholders are concerned.

Admission to AIM and Total Voting Rights 

Application will be made for the Consideration Shares and the Settlement Shares, which total 87,264,997 new ordinary shares and which will rank pari passu with the Company's existing ordinary shares, to be admitted to trading on AIM ("Admission"). It is expected that Admission of the New Ordinary Shares will become effective and that dealings will commence at 08.00 am on or around 5 December 2023.

Following Admission, the Company's enlarged issued share capital ("Enlarged Issued Share Capital") will comprise 484,938,611 ordinary shares of £0.01 each with voting rights in the Company. This figure may be used by shareholders in the Company as the denominator for the calculations by which they will determine if they are required to notify their interest in, or a change in the interest in, the share capital of the Company under the FCA's Disclosure and Transparency Rules.

Following issuance of the Consideration Shares, OFX will hold 82,469,367 ordinary shares of ADM Energy plc representing 17% of the Enlarged Issued Share Capital of the Company on Admission.

Commenting on the OFX Technologies Investment Stefan Olivier said, "The oil and gas digital services market is in a period of rapid growth, the investment in Efficient Oilfield Solutions gives ADM shareholders exposure to this sector through a company with momentum in the industry led by an impressive and focused management team.  ADM intends to maximize the value of its traditional upstream oil and gas interests and consistent with its Investing Policy will continue to look at a range of opportunities within the natural resources space, however the Board of ADM have resolved to focus on energy technology as we believe the opportunities available to the Company are very attractive in terms of driving growth in both value and cash flow per share."   

Enquiries:

About ADM Energy PLC

ADM Energy PLC (AIM: ADME; BER and FSE: P4JC) is a natural resources investing company with an existing asset base in Nigeria and the United States. ADM Energy holds a 9.2% profit interest in the oil producing Aje Field, part of OML 113, which covers an area of 835km² offshore Nigeria. Aje has multiple oil, gas, and gas condensate reservoirs in the Turonian, Cenomanian and Albian sandstones with five wells drilled to date.  ADM also has interest in an oil and gas lease in the U.S. State of California.

ADM Energy is committed to maximizing long-term value from its existing asset base in Nigeria while targeting other investment opportunities in the oil and gas sector with attractive risk reward profiles such as proven nature of reserves, level of historic investment, established infrastructure and route to early cash flow.

About OFX Holdings, LLC

Formerly, Tennessee Black Gold LLC, OFX Holdings is a private U.S. investment company led by Claudio Coltellini, an Italian national who for the last 15 years has invested in U.S. oil and gas and leads four private companies with assets in the states of Texas, Louisiana, Kansas and California.

About OFX Technologies, LLC and Efficient Oilfield Solutions, LLC

OFX Technologies, LLC is a newly formed Texas limited liability company that owns 100% of the membership interest of Efficient Oilfield Solutions, LLC ("EOS").  In addition to serving as the holding company for EOS, OFXT is exploring other technology applications and joint ventures in the energy space.  OFX Technologies website is www.ofxtechnologies.com and EOS' website is www.efficientoilfieldsolutions.com.   Thomas Bower is Chief Executive Officer of OFX Technologies.

Forward Looking Statements

Certain statements in this announcement are, or may be deemed to be, forward looking statements. Forward looking statements are identified by their use of terms and phrases such as "believe", "could", "should", "envisage'', "estimate", "intend", "may", "plan", "potentially", "expect", "will" or the negative of those, variations or comparable expressions, including references to assumptions. These forward looking statements are not based on historical facts but rather on the Directors' current expectations and assumptions regarding the Company's future growth, results of operations, performance, future capital and other expenditures (including the amount, nature and sources of funding thereof), competitive advantages, business prospects and opportunities. Such forward looking statements reflect the Directors' current beliefs and assumptions and are based on information currently available to the Directors.