Australis to Acquire Encana US Shale Assets for US$80 Million

Australis Oil & Gas Limited (Australis) through its indirect wholly-owned American subsidiary, Australis TMS Inc., has entered into a Purchase & Sale Agreement (PSA) with Encana Oil & Gas (USA) Inc. (Encana), a wholly-owned subsidiary of Encana Corporation, to acquire all of Encana’s TMS assets (Assets) for cash consideration of US$80 million, subject to closing adjustments.

The Assets include:

? Working interests in 31 operated and producing wells (29 net wells) and 16 non operated producing wells (1.6 net wells)
? 62,000 net acres leased (35% HBP) within the production defined TMS Core area and within Permitted Drilling Units
? A further 60,000 acres within the TMS Core area outside of existing Permitted Drilling Units
? Considerable high quality technical data and knowledge transferance by Encana

Following completion of the acquisition, Australis will hold the largest net acreage position in the oil rich TMS Core, operating in total over 100,000 net acres, some with existing oil production and cashflow. Independent engineers, Ryder Scott Company LP, place a pre-tax NPV 10 value of US$95 million for the Asset Proved Developed and Producing (PDP) oil reserves of 5.0 million bbls as at 1 February 2017 (the Investor Presentation contains further disclosure on the Ryder Scott report). The net acreage position provides Australis with significant upside. Ryder Scott estimates 80.2 million bbls of 2C oil resources based on an 8% recovery and 215 future well locations using approximately 250 acre spacing between each well.

The acquired acreage position is contiguous with Australis’ existing 50% working interest in 38,000 acres within the TMS Core. This existing position was recently assessed by Ryder Scott with 26.4 million bbls 2C contingent resources comprising 76 future net well locations using approximately 250 acre spacing between each well.

Commenting on the transaction Chairman Jonathan Stewart stated “The TMS Asset acquisition is the transformational acquisition we have been looking for since we formed Australis in late 2014. We’ve looked at many opportunities, have remained patient and in our view nothing we have seen compares to the fundamental value and considerable upside potential that this transaction delivers.

“We see many parallels to the early days of the Eagle Ford. We believe that our Aurora Oil & Gas experience in the Eagle Ford from discovery to full development and then sale in 2014 offers us key learnings to apply togenerating significant value for shareholders. Australis will become the largest holder in one of the few remaining undeveloped oil producing shale basins in the United States and our large position is in the productive oil rich core of the TMS.

“This acquisition also meets the strategic objectives we set at establishment of the Company and reconfirmed at IPO. The Assets have existing production, positive cashflow, large undeveloped resources, control over timing and amount of capital expenditure and solid and improving economics. The transaction together with our existing TMS position provides the platform for significant value creation for Australis shareholders.”

“The considerable support offered by existing and new shareholders to achieve this result is appreciated and together with pre-existing cash balances and cash flow provides management with funding to progress its plans through 2017 and in to 2018.”