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Strata-X to Farm-in to 273,000 Acre Botswana CSG Project

Source: 11/14/2016, Location: Africa

ASX disclosure note - 5.28.2 - The estimated quantities of petroleum that may potentially be recovered by the application of a future development project(s) relate to undiscovered accumulations. These estimates have both an associated risk of discovery and a risk of development. Further exploration appraisal and evaluation is required to determine the existence of a significant quantity of potentially moveable hydrocarbons.

The directors and management of Strata-X Energy Ltd. (Strata-X) has entered into a heads of agreement with Magnum Gas and Power Ltd (Magnum) for a staged farm-in to earn up to 75% of the Serowe CSG project located on the Kalahari Basin CSG Fairway in Botswana, Africa. Strata-X will operate the Project, which spans approximately 273,000 acres and has certified 1075 PJ of recoverable Prospective Resources.

The Republic of Botswana is one of the oldest democracies in Africa becoming independent in 1966. It has a long-standing rule of law and the lowest rate of corruption in Africa. The geography of the Project area is predominantly flat with good road access. There is a growing demand for power in the country and in neighboring countries which offers immediate and expanding domestic gas markets. These factors, combined with a 3% government royalty on produced gas, makes Botswana one of the more favorable economic settings in the world.

The Farm-in Terms

Strata-X has entered into a Heads of Agreement with Magnum containing the key commercial terms of the proposed farm-in. Legally binding long form agreements in respect of the farm-in to the Serowe CSG Project are expected to be finalized and entered into between the parties within the next 2 weeks. The proposed farm-in is in three stages and the Company has up to 3 years to complete all stages, with each stage earning the company a 25% working interest in the Serowe CSG Project. The first stage will begin in January of 2017 and will involve the desorption analysis of 3 CSG core wells as required for continued gas resource certification. In addition, one well will be completed and production tested.

Stage 1 is a firm commitment and is estimated to cost A$1.1 million dollars. Stages 2 and 3 are optional and the decision to proceed to these stages will be based on the results of the prior stages. Stages 2 and 3 are estimated to costs approximately A$1.5 million and A$3.5 million, respectively depending on the success of new completion and production methods to be trialed.

The final 25% working interest is earned when 100 PJ of 2P reserves are certified for the project, which is a sufficient quantity of gas for a Gas Sales Agreement (GSA) to supply a 50-megawatt government owned corporation power station, which may be located near the Serowe CSG Project.

Advisers and Certifiers Appointed

MHA Petroleum Consultants, Denver, Colorado, recognized expert in CSG, have been appointed the Company’s CSG advisers and certifiers. MHA has certified mean recoverable Prospective Resource of 1075 PJ net to Strata-X for the Serowe CSG Project and will continue to advise on the appraisal and development of the Project.

Placement to Sophisticated Investors to Raise Minimum of A$2 million

To fund Stage 1 of the farm-in and obtain working capital, the Company has engaged Bizzell Capital Partners Pty Ltd (BCP) as lead manager who has secured firm commitments for a private placement to sophisticated investors of 40,000,000 CDIs at A$0.05 per share for gross proceeds of A$2,000,000 (the "Placement") subject to legally binding long form agreements being entered into in respect of the farm-in to the Serowe CSG Project and any necessary shareholder approvals. Each CDI will represent one common share of Strata-X and will rank equally with existing CDIs. All CDIs issued pursuant to the Placement are to be tradeable and listed on the Australian Securities Exchange. The Company has also reserved the right to take oversubscriptions of up to a further A$500,000 (10,000,000 CDIs).

Subject to shareholder approval, Strata-X directors will subscribe for a minimum of A$350,000 of the Placement. BCP, the Lead Manager to the Placement has also committed to subscribe for a minimum of A$200,000 of the Placement.

To ensure compliance with TSX Venture Exchange capital raising requirements, the Board of Directors of the Company have approved a consolidation of the common shares of the Company (the "Shares") on the basis of one (1) post-consolidated Share for every three (3) pre-consolidated Shares (the "Consolidation"). The Consolidation is subject to the approval of the TSX Venture Exchange and the ASX.

The Placement is expected to close in two tranches, subject to completion of the Consolidation and also legally binding long form agreements being entered into in respect of the farm-in to the Serowe CSG Project in the Kalahari Basin CSG fairway in Botswana, Africa. The first tranche of A$435,000 will be completed using the Company’s current placement capacity under the ASX Listing Rules and will settle immediately post the Consolidation which is expected to occur 29 November 2016. The second tranche of a minimum of A$1.565 million is subject to receipt of shareholder approval at the Company’s Annual General Meeting (AGM) to be held on December 9, 2016. This tranche and any oversubscriptions accepted by the Company is expected to close within 3 days of the AGM.

As part of its Lead Manager fee, BCP (or its nominees) are to be issued 5 million options exercisable at A$0.07 and with a term of three years.

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Related Categories: Accounting, Statistics  Acquisitions and Divestitures  Asset Portfolio Management  Economics/Financial Analysis  General  Industrial Development  Insurance  Investment  Mergers and Acquisitions  Risk Management 

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