Criterium Energy Ltd. (CEQ) ("Criterium"), an independent upstream energy development and production company focused in Southeast Asia, is pleased to announce that, due to strong investor demand, it is increasing the size of its financing for aggregate gross proceeds of approximately C$18.9 million, led by Research Capital Corporation, in connection with the acquisition ("Acquisition") of all the issued and outstanding shares of Mont D'Or Petroleum Limited ("MOPL") pursuant to a sale and purchase agreement ("SPA").
The increased size of the financing consists of:
- an underwritten offering of 60,910,000 equity subscription receipts of the Company (the "Equity Subscription Receipts") at a price of C$0.11 per Equity Subscription Receipt for gross proceeds of approximately C$6.7 million by way of a short form prospectus (the "Public Offering"). The Company will enter into an underwriting agreement with Research Capital Corporation as the sole underwriter and sole bookrunner (the "Underwriter") for the Public Offering. Each Equity Subscription Receipt will entitle the holder thereof to receive, without payment of any additional consideration and with no further action on the part of the holder thereof, one unit of the Company (a "Unit") upon satisfaction of certain Escrow Release Conditions (as defined below) prior to the Escrow Release Deadline (as defined below). Each Unit will consist of one common share in the capital of the Company (a "Common Share") and one Common Share purchase warrant (each, a "Warrant"). Each Warrant will entitle the holder to purchase one Common Share (a "Warrant Share") at an exercise price of C$0.14 per Warrant Share until the date that is 60 months following the satisfaction or waiver of the Escrow Release Conditions;
- a convertible loan in the principal amount of C$12.2 million ("Convertible Loan").
The Financing is anchored by a strategic investor (the "Strategic Investor") participating for an aggregate of C$14.7 million, including the entirety of the C$12.2 million Convertible Loan and C$2.5 million in the Public Offering. Certain directors, officers and employees of the Company have provided indication of interests to participate in the Public Offering alongside other investors.
Financing Details
The Company has entered into a letter of intent and the Company intends to enter into a loan agreement prior to the closing of the Acquisition (the "Loan Agreement") in connection with the Convertible Loan pursuant to which the Strategic Investor will agree to advance C$12.2 million in principal amount to the Company. In addition, the Company will issue to the Strategic Investor 76,250,000 Warrants (the "Loan Warrants"). The Convertible Loan will be issued on or before the closing of the Acquisition and is subject to a number of conditions, including the closing of the Public Offering and the approval of the TSX Venture Exchange ("TSXV").
The Convertible Loan shall bear interest at a rate of 14.75% per annum from the date of issue, accrued daily and payable monthly in cash. The principal amount of the Convertible Loan shall be convertible, for no additional consideration, into Common Shares at the option of the holder at any time prior to the close of business on the third business day preceding the date that is 60 months from the date following the satisfaction or waiver of the Escrow Release Conditions (the "Maturity Date") at a conversion price equal to C$0.16 per Common Share, subject to customary adjustments.
The Convertible Loan will be subordinated in right of payment of principal and interest to all senior obligations of the Company and will be secured by a general charge over the Company's assets. The outstanding principal amount of the Convertible Loan will be repaid in full on the Maturity Date in cash. On and following the date that is the second anniversary of the satisfaction of the Escrow Release Conditions, the Company shall have the right to partially or fully repay the outstanding principal amount of the Convertible Loan in cash at a premium of 14.75% to the outstanding principal amount at the time of repayment, plus any unpaid accrued interest, by giving 30-days written notice to the Strategic Investor.
The Company intends to use the net proceeds from the Financing for: (i) drilling activities in 2023/2024 to ramp up oil production focused on the Tungkal PSC; (ii) planning associated with the Tungkal PSC gas monetization tie-in project; and (iii) repaying a portion of debt with certain MOPL's existing lenders in connection with the Acquisition in order to reduce the total debt.
Upon closing of the Public Offering, the net proceeds will be placed in escrow (the "Escrowed Proceeds") with an escrow agent ("Escrow Agent") and will be released to the Company (together with the interest thereon) upon satisfaction of certain escrow release conditions ("Escrow Release Conditions") and the Underwriter receiving a certificate from the Company prior to the Termination Time (as defined below) to the effect that:
(a) the completion, satisfaction or waiver of all conditions precedent to the Acquisition in accordance with the SPA (save and except for those conditions precedent which are contingent upon and/or will be completed, satisfied or waived concurrent with or as part of the closing of the Acquisition (the "Concurrent Conditions Precedent"), provided that the Chief Executive Officer of the Company (or such other officers as may be acceptable to the Underwriter, acting reasonably) has certified to the Underwriter that, to the best of his information, knowledge or belief, no event, circumstance or condition exists which could reasonably be expected to result in any of the Concurrent Conditions Precedent not being completed, satisfied or waived concurrent with or as part of the closing of the Acquisition; it being understood and agreed that certain of the Concurrent Conditions Precedent may be completed or satisfied pursuant to the giving and acceptance of solicitors' undertakings, as applicable, to the satisfaction of the Underwriter, acting reasonably;
(b) the receipt of all required shareholder and regulatory approvals, including, without limitation, the conditional approval of the TSXV for the Acquisition;
(c) the Strategic Investor having completed satisfactory due diligence on the Company, in its sole discretion;
(d) the Company obtaining shareholder approval for the Strategic Investor to become a "control person" of the Company;
(e) the issuance of the Convertible Loan and the Loan Warrants on before the closing of the Acquisition;
(f) the representations and warranties of the Company contained in the underwriting agreement to be entered into in connection with the Public Offering being true and accurate in all material respects, as if made on and as of the escrow release date; and
(g) the Company and the Underwriter having delivered a joint notice and direction to the Escrow Agent, confirming that the conditions set forth in (a) to (f) above have been met or waived.
If (i) the Escrow Release Conditions are not satisfied or waived on or prior to 5:00 p.m. (Toronto time) on the date that is 90 days following the closing of the Public Offering (or such later date as the Underwriter may consent in writing); (ii) the Acquisition is terminated in accordance with its terms; or (iii) the Company has advised the Underwriter or the public that it does not intend to proceed with the Acquisition (in each case, the earliest of such times being the "Termination Time"), the Company would then be responsible to refund the gross proceeds of the Public Offering (including the amount of the Underwriter's commission and the Underwriter's expenses) to the holders of Equity Subscription Receipts.
The Public Offering is expected to close on or about the week of October 16, 2023, or such other date as the Company and the Underwriter may agree. Closing of the Public Offering is subject to customary closing conditions, including, but not limited to, the receipt of all necessary regulatory approvals, including the approval of the securities regulatory authorities and the TSXV.
The Convertible Loan and Warrants issuable pursuant to the Convertible Loan will be subject to a statutory hold period lasting four months and one day following the closing of the Convertible Loan pursuant to Canadian securities laws. The Equity Subscription Receipts will be offered by way of a short form prospectus to be filed in each of the provinces of Canada (other than Québec) and may be offered in the United States on a private placement basis pursuant to an appropriate exemption from the registration requirements under applicable U.S. law, and outside of Canada and the United States on a private placement or equivalent basis. An amended and restated preliminary short form prospectus will be available on SEDAR at www.sedarplus.ca shortly. The Company will make commercially reasonable efforts to list the Warrants issuable underlying the Subscription Receipts.
This news release does not constitute an offer to sell or a solicitation of an offer to buy any of securities in the United States. The securities have not been and will not be registered under the U.S. Securities Act or any state securities laws and may not be offered or sold within the United States or to U.S. Persons unless registered under the U.S. Securities Act and applicable state securities laws or an exemption from such registration is available.
The Acquisition is subject to Criterium successfully completing the Financing and receiving TSXV approval for the Acquisition.
