NOT FOR DISTRIBUTION IN THE UNITED STATES OR TO US NEWSWIRE SERVICES OR ANY OTHER JURISDICTION IN WHICH IT WOULD BE UNLAWFUL TO DO SO. ANY FAILURE TO COMPLY WITH THIS RESTRICTION MAY CONSTITUTE A VIOLATION OF THE SECURITIES LAWS OF SUCH JURISDICTIONS. THE OFFERS AND SALES OF SECURITIES REFERRED TO BELOW HAVE NOT BEEN AND WILL NOT BE REGISTERED UNDER THE SECURITIES ACT OF 1933 AND MAY NOT BE OFFERED OR SOLD IN THE UNITED STATES ABSENT REGISTRATION UNDER THE SECURITIES ACT OR AN EXEMPTION FROM SUCH REGISTRATION.
Tethys Petroleum Limited (TSX:TPL)(LSE:TPL) (“Tethys” or the “Company”) announces that is has entered into a binding investment agreement (the “Investment Agreement”) with Olisol Investments Limited (“Olisol”) setting out the terms and conditions upon which Olisol Petroleum Limited, a wholly-owned subsidiary of Olisol (“OPL”), has agreed to purchase 181,240,793 new ordinary shares in Tethys (“Shares”) at a price of C$0.054 per Share, for total proceeds of C$9,787,003, by way of a private placement (the “Placing”) and to commit to backstop a further equity fundraising of 50 million Shares at C$0.054 per Share (the “Further Financing”, together the “Transaction”). The Further Financing will generate proceeds of C$2,700,000 for a total of C$12,487,003 under the Transaction. The Investment Agreement amends and restates the investment agreement that was signed by the Parties on December 7, 2015.
Currently, there are 400,004,848 Shares outstanding, of which, Olisol owns 63,044,461 Shares or approximately 15.8% of the outstanding Shares. All of the Shares held by Olisol were issued on the previously announced conversion at US$0.10 per Share of US$6,304,446 of the outstanding indebtedness under the Facility Agreement entered into with Olisol on November 19, 2015, as amended on March 2, 2016 (as amended, the “Facility Agreement“).
Following the Placing (181,240,793 Shares) there will be 581,245,641 Shares in issue, of which Olisol will own 244,285,254 Shares or approximately 42.0% of the outstanding Shares. In addition, Olisol has the right to convert the remaining US$1 million aggregate principal amount plus accrued but unpaid interest under the Facility Agreement into Shares at a conversion price of C$0.054 per Share. As part of the Investment Agreement, Olisol is committing to fund working capital requirements of the Company until closing of the Placing and completion of a US$10 million loan, subject to certain conditions. Amounts advanced under this obligation will also convert at C$0.054 per Share.
Placing and Further Financing
- Tethys and Olisol have entered into a definitive Investment Agreement providing for the Placing, commitment by Olisol to backstop the Further Financing and a commitment by Olisol to fund working capital requirements until the closing of the Placing and when Tethys has secured a US$10 million loan, provided that certain conditions are met. Any amounts advanced as working capital indebtedness will be, subject to TSX approval, convertible, at Olisol’s option, into Shares at a conversion price of $0.054 per Share.
- An injection of C$9.8 million of new capital into Tethys by OPL by way of a subscription for 181,240,793 Shares at C$0.054 per Share.
- Following completion of the Placing, the Company proposes to undertake the Further Financing of 50,000,000 Shares to its 20 largest shareholders at C$0.054 per Share, which will be backstopped by OPL, raising C$2,700,000 or a total of C$12,487,003 together with the Placing.
- The Investment Agreement requires the Parties to enter into a Relationship Agreement on closing which will address certain conflicts of interest and related party matters. The Relationship Agreement will only apply if OPL owns 25% or more the outstanding Shares.
- The Company has called its Annual General Meeting for May 31, 2016 and the Management Information Circular and Proxy material will be available on SEDAR and mailed to shareholders in the next few days. Shareholders will be asked to vote on the Placing and associated resolutions at the meeting. The Management Information Circular will contain further details regarding the Placing, the Investment Agreement and the Relationship Agreement.
- A copy of the Investment Agreement and Relationship Agreement will be filed on SEDAR in a timely manner.
- In addition to customary closing conditions for transactions of this nature, OPL’s obligation to complete the Placing shall be subject to satisfaction or waiver of the following:
- receipt of all required approvals from the Government of Kazakhstan;
- receipt of all required shareholder, regulatory, exchange and other third party approvals; and
- aggregate debt of Tethys, net of cash, being not greater than US$40 million (excluding the US$1 million outstanding under the Facility Agreement and any working capital indebtedness advanced under the Investment Agreement).
- Assuming that shareholders approve the Placing at the May 31, 2016 shareholders meeting, the Company will then be required to amend the articles of the Company (the “Articles“) to reduce the par value of the Shares from US$0.10 to US$0.01 to allow for the issuance of the Shares under the Placing. The Company anticipates that it will take approximately six to eight weeks to complete the process of amending the Articles following the shareholder meeting, and that the Placing would close very shortly thereafter. The Placing and Further Financing are subject to regulatory approvals, including approval of the Toronto Stock Exchange, and shareholder approval as required by the rules of the Toronto Stock Exchange and applicable securities laws.
Tethys is focused on oil and gas exploration and production activities in Central Asia and the Caspian Region. This highly prolific oil and gas area is rapidly developing and Tethys believes that significant potential exists in both exploration and in discovered deposits.
Olisol has advised that it will pursue the Transaction through its wholly-owned subsidiary Olisol Petroleum Limited. Olisol and its subsidiaries and affiliates have investments in energy and oil & gas operations in the Russian Federation and Kazakhstan. Olisol is incorporated under the laws of Cyprus and is headquartered in Almaty, Kazakhstan.
Some of the statements in this document are forward-looking. Forward-looking statements include statements regarding the intent, belief and current expectations of the Company or its officers with respect to the Placing. The Further Financing, any advance of working capital indebtedness and the amendment of the Articles or receipt of a US$10 million loan. When used in this document, the words “expects,” “believes,” “anticipates,” “plans,” “may,” “will,” “should” and similar expressions, and the negatives thereof, are intended to identify forward-looking statements. Such statements are not promises or guarantees, and are subject to risks and uncertainties that could cause actual outcomes to differ materially from those suggested by any such statements including with respect to completion of the Placing, the Further Financing, any advances of working capital indebtedness, the amendment to the Articles or receipt of a US$10 million loan, and receipt of proceeds, required shareholder approval and required regulatory approvals, use of proceeds, and, effective implementation of the agreed form Relationship Agreement.
The forward-looking statements are based on the following assumptions: that the Placing and Further Financing and amendments to the Articles will be completed and all shareholder and other required approvals will be obtained and that conditions will be fulfilled and funds received under the Investment Agreement or relating to any request for working capital indebtedness within anticipated timeframes.
No part of this announcement constitutes, or shall be taken to constitute, an invitation or inducement to invest in the Company or any other entity, and shareholders of the Company are cautioned not to place undue reliance on the forward-looking statements. Save as required by the Listing Rules and applicable law, the Company does not undertake to update or change any forward-looking statements to reflect events occurring after the date of this announcement.
Tethys Petroleum Limited