Gran Tierra Energy Inc., a company focused on oil and gas exploration and production in Colombia, is pleased to announce that it and its indirect wholly-owned subsidiary, Gran Tierra Energy International Holdings Ltd. ("GTEIH"), have entered into a share purchase agreement with PetroTal Ltd. ("PetroTal"), and Sterling Resources Ltd. ("Sterling") pursuant to which GTEIH has agreed to sell all of the issued and outstanding shares of its wholly owned subsidiary, Gran Tierra Energy International Peru Holdings B.V. ("GTEIPH"), subject to the satisfaction of certain conditions (the "SPA").
In connection with the SPA, Sterling and PetroTal have concurrently entered into an arrangement agreement under which they have agreed, subject to certain conditions, that: (a) PetroTal will complete a reverse take-over of Sterling; (b) Sterling and PetroTal will be amalgamated; and (c) the management and board of directors of Sterling will be reconstituted (such transactions being referred to herein as the "Arrangement", and the resulting entity being referred to herein as the "Resulting Issuer").
Subject to the terms of the SPA, the Resulting Issuer has agreed to acquire all of the issued and outstanding shares of GTEIPH from GTEIH as the final step of the Arrangement, in exchange for 187,250,000 common shares of the Resulting Issuer ("Resulting Issuer Shares"), representing approximately 38% of the issued and outstanding Resulting Issuer Shares, plus or minus a cash-settled working capital adjustment.
Gran Tierra will evaluate its investment in the Resulting Issuer from time to time and may, based on such evaluation, market conditions and other circumstances, increase or, subject to applicable escrow periods under the rules of the TSX Venture Exchange ("TSXV"), decrease shareholdings as circumstances require through market transactions, private agreements, or otherwise.
Closing of the Arrangement and the transactions contemplated by the SPA (collectively, the "Peru Transaction") is subject to a number of conditions precedent, including the completion of a minimum US$25 million equity financing by PetroTal, TSXV approval of, inter alia, the reverse take-over of Sterling and the listing of the Resulting Issuer's shares on the TSXV, certain minimum working capital levels of PetroTal and Sterling and other regulatory and customary conditions. There can be no assurance that the conditions will be met or that the transaction will be completed as proposed or at all.
The SPA provides that, at closing, GTEIH and Gran Tierra Resources Limited ("GTRL") will enter into an investor rights agreement with Sterling, pursuant to which, inter alia, GTEIH and GTRL will: (a) be granted the right to nominate two directors to the board of the Resulting Issuer, (b) be granted certain demand and piggy-back registration rights and certain pre-emptive rights and, (c) agree not to exercise their voting rights over more than 30% of the issued and outstanding Resulting Issuer Shares, the whole subject to the terms and conditions set forth therein.
In addition, the SPA provides that, at closing, GTEIH will enter into a carried interest and option agreement with Sterling and a Peruvian subsidiary, pursuant to which GTEIH will be granted a 20% carried working interest in Block 107, located in the Ucayali basin in Peru, which interest will, at the option of GTEIH, either be converted to a non-carried working interest or be forfeited following the drilling of an exploration well in Block 107.
Following the completion of the Peru Transaction, the Purchaser expects that its Resulting Issuer Shares acquired under the Peru Transaction will be deposited with an escrow agent and subject to the terms of an escrow agreement, substantially in the form required by the TSXV.
