Proposed Placing to Raise £14.1 Million

Source: 6/12/2020, Location: South America

PetroTal Corp., the Peruvian focused E&P company, is pleased to announce a placing of 141.2 million Placing Units at a price of 10p per unit to raise gross proceeds of £14.1 million (approximately US$18 million). Each Placing Unit will be comprised of one new Common Share and one half of one Warrant.

Placing highlights
- The Placing was significantly oversubscribed.
- The Company intends to use the net proceeds of the Placing for ongoing development of the Bretana oilfield and to enhance working capital. In particular, the net proceeds will be deployed by the Company in connection with the proposed reopening of the Bretana oilfield which is anticipated to occur in July.
- With a stronger balance sheet, PetroTal will be able to finalize a credit facility for day-to-day operations and structure derivatives to minimize the impact of future oil price fluctuations.
- Auctus Advisors is acting as sole bookrunner on the Placing. Strand Hanson is acting as Nominated and Financial Adviser to the Company.

Background to and reasons for the Placing
As recently announced, PetroTal has entered into a financial arrangement with PETROPERU S.A. (“Petroperu”) relating to the contingent liability due to Petroperu which will see the entire contingent liability resolved on a one-time basis and see the obligation paid evenly over a three year period, at an annual interest rate of 6.5%.

Meanwhile, however, the Bretana oil field remains shut down awaiting opening of the Northern Oil Pipeline (“ONP”) by Petroperu. PetroTal is coordinating with Petroperu to reopen the Bretana oil field in July 2020, with the expectation that the ONP restarts pumping oil very shortly thereafter. Both PetroTal and Petroperu will fully abide by the health directives issued by the Peruvian government in order to safely restart operations during the ongoing Covid-19 pandemic.

In this period of uncertainty in the context of the Covid-19 pandemic, the Directors consider that strengthening its balance sheet with additional working capital is a prudent action.

Details of the Placing
The Company will raise gross proceeds of £14.1 million pursuant to the Placing. The Placing will result in the issue of a total of 141,203,891 new Common Shares and 70,601,945 Warrants. The Placing Shares will represent approximately 17.3 per cent. of the Enlarged Share Capital.

The Placing Price represents a discount of approximately 11 per cent. to the closing mid-market price per existing Common Share of 11.25 pence on June 11, 2020, being the last practicable trading day prior to release of this announcement.

The Placing Shares will, when issued, be subject to the Articles and By Laws, be credited as fully paid and non-assessable and rank equally in all respects with each other and with the Existing Common Shares, including the right to receive all dividends and other distributions declared, made or paid in respect of the Common Shares after the date of issue of the Placing Shares.

Each Placing Unit will comprise one Placing Share and one half of one Warrant.

A whole Warrant (comprised of two half Warrants) will have an exercise price of 16p per Common Share, which equates to a 60% premium above the Placing Price, and will be capable of being exercised at any time from and after the date of Admission until the third anniversary of Admission. The Warrants can only be exercised for cash.

The Warrant exercise price and the number of shares issuable upon exercise of the Warrants will be adjusted in certain circumstances, including if the Company effects a subdivision or consolidation of its Common Shares, declares a dividend or distribution, or there is a reorganisation of its Common Shares.

Related Party Transaction
As at June 11, 2020, Meridian Capital International Fund (“Meridian”) held approximately 11.8 per cent. of the Existing Share Capital and, as such, is considered to be a related party of the Company as defined by the AIM Rules.

Meridian is participating in the Placing for an amount of £7.5 million and this participation constitutes a related party transaction pursuant to AIM Rule 13 and Multilateral Instrument 61-101 Protection of Minority Security Holders in Special Transactions (“MI 61-101”). Following completion of the Placing, Meridian and its linked parties will hold 19.42 per cent. of the Enlarged Share Capital.

The Directors, other than Mr. Gavin Wilson, who represents Meridian on the Board, having consulted with the Company’s nominated adviser, Strand Hanson Limited, consider that the terms of the participation by Meridian are fair and reasonable insofar as the shareholders of the Company are concerned. In its consideration and approval of the Placing, the Directors determined that it was exempt from the formal valuation and minority approval requirements of MI 61-101 on the basis that the fair market value of the Placing to Meridian did not exceed 25% of the market capitalization of PetroTal, in accordance with Sections 5.5 and 5.7 of MI 61-101.

The terms of the Warrants issued to Meridian will provide that, subject to certain exceptions, Meridian shall not exercise any Warrants where such exercise would result in Merdian’s beneficial ownership, direction or control of the issued and outstanding Common Shares at the time of exercise exceeding 19.99%.

Placing Agreement
The Company and Auctus have entered into the Placing Agreement pursuant to which (a) the Company has appointed Auctus as the Company’s agent to use its reasonable endeavours to procure subscribers for the Placing Units at the Placing Price. The Placing is not underwritten. The Company has agreed to pay Auctus certain commissions in connection with the Placing.

The Placing is conditional on, amongst other things, Admission of the Placing Shares occurring on or before 8.00 a.m. on June 18, 2020 (or such later time and/or date as the Company and Auctus may agree, being not later than 8.00 a.m. on June 26, 2020).

The Placing Agreement contains certain customary warranties given by the Company concerning the accuracy of the information in this Announcement as well as other matters relating to the Group and its business. The Placing Agreement is terminable by Auctus in certain circumstances prior to Admission, including for force majeure or in the event of a material adverse change to the business of the Company or the Group. The Company has also agreed to provide a market standard indemnity and undertakings to Auctus.

Application will be made to: (a) the London Stock Exchange for Admission of the Placing Shares to trading on AIM; and (b) the TSXV for listing of the Placing Shares for trading on the facilities of the TSXV.

It is expected that Admission will become effective at 8.00 a.m. on June 18, 2020 (or such later date as the Company and Auctus may agree, being not later than 8.00 a.m. on June 26, 2020) and that dealings in the Placing Shares will also commence at that time.

The Warrants will not be admitted to trading on AIM or listed for trading on the facilities of the TSXV.

Without prior written approval of the TSXV and compliance with all applicable Canadian securities laws, the Placing Shares, Warrants and Common Shares issuable on the exercise of Warrants may not be sold, transferred, hypothecated or otherwise traded on or through the facilities of TSXV or otherwise in Canada or to or for the benefit of a Canadian resident until the date that is four months and a day after the date of issuance.

The relevant clearances have not been, nor will they be, obtained from the securities commission of any province or territory of Canada; no prospectus has been lodged with or registered by, the Australian Securities and Investments Commission or the Japanese Ministry of Finance; and the Placing Shares and Warrants have not been, nor will they be, registered or qualified for distribution, as applicable under or offered in compliance with the securities laws of any state, province or territory of United States, Australia, New Zealand, Canada, Japan or South Africa. Accordingly, the Placing Units may not (unless an exemption under the relevant securities laws is applicable) be offered, sold, resold or delivered, directly or indirectly, in or into the United States, Australia, New Zealand, Canada, Japan or South Africa or any other jurisdiction outside the United Kingdom.

Manolo Zuniga, President and Chief Executive Officer, commented:
“In light of the recent fall in global oil prices and the temporary shut in of the Bretana oil field, we have sought to preserve liquidity and are taking the opportunity to strengthen the Company’s balance sheet via this fundraise.

The Placing and the arrangement announced with Petroperu today will give PetroTal greater financial strength and sufficient flexibility to prepare for the reopening of the Bretana field, which is expected to occur in July. Additionally, the Petroperu arrangement and support by the Peruvian government, demonstrates that Peru provides an excellent investment climate.

I would like to thank our investors for their continued support, as seen with the Placing being oversubscribed, and I look forward to keeping the market appraised on developments at Bretana over the coming months.”

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