Dr. Ming Wang reports

PRIMELINE ANNOUNCES REPAYMENT OF TRANCHE A BONDS

Through the support of its chairman and major shareholder, Primeline Energy Holdings Inc. has repaid its outstanding $10-million (U.S.) principal amount Tranche A bonds issued to GRF Prime Ltd., in accordance with its terms, on Aug. 14, 2018. GRF Prime is a private equity fund managed by GEMS Investment Management Services Ltd., a Hong Kong-based manager of private equity funds.

The Tranche A bonds were due for repayment on Aug. 14, 2018, and the redemption amount due, including the redemption premium, amounted to approximately $11.3-million (U.S.). Primeline has been in discussions with GEMS since mid-2017 with respect to an extension of the bonds in order to defer the repayment date to a later date to allow time to complete the hearing of the arbitration against CNOOC and receive the ruling of the tribunal. The hearing of the CNOOC arbitration is fixed to take place in Singapore in September, 2018. However, the company was not able to comply with the terms demanded by GEMS as a condition for its agreement to the extension and such discussions were terminated last week when GEMS confirmed that it required that the Tranche A bonds be repaid on the maturity date.

As a result of Primeline's previous dispute with Zhejiang Gas and Primeline's continuing dispute with CNOOC, the company suffered a severe loss and reduction of cash flow with resultant difficulties in meeting its financial obligations, particularly its bank debt service obligations. The lending banks, being China Development Bank, China Export and Import Bank, and Shanghai Pudong Development Bank, which financed the company's investment in the LS36-1 development project, however, have been extremely supportive and, in 2016, agreed to a restructuring of the loan terms with an improvement in the commercial terms.

The Tranche A bonds are unsecured. All cash flow from Primeline's LS36-1 gas field is charged to and controlled by the syndicate banks and it has not been possible to secure the release of funds with which to repay the Tranche A bonds. As a result, the company did not have sufficient funds available to repay the Tranche A bonds.

The refusal by GRF Prime to agree to an extension of Tranche A bonds put the company in an extremely difficult position ahead of the CNOOC arbitration hearing in September and the company is extremely disappointed by the action taken by GEMS on behalf of GRF Prime.

However, Primeline is extremely pleased to announce that the company has secured support from Victor Hwang, Primeline's president, chairman and majority shareholder, to allow the company to pay the redemption amount due in respect of the Tranche A bonds and remain in good standing at this crucial time.

Payment of the redemption amount due on the Tranche A bonds has been funded by a loan of $11.3-million (U.S.) from Mr. Hwang. Mr. Hwang's loan will be secured by the issuance by Primeline of $11.3-million (U.S.) principal amount of bonds having the same terms as the Tranche A bonds. The Tranche A bonds were for an initial three-year term expiring on Aug. 14, 2018, extendable at the election of the holder for two additional periods of one year. Accordingly, the new bonds will be deemed to have been issued on Aug. 14, 2018, and will be for an initial period of one year, extendable for a further year at the option of the holder, and will otherwise be on the same terms, mutatis mutandis, as the Tranche A bonds. Interest will be payable on the new bonds quarterly at 7 per cent per annum, of which 4.5 per cent will be payable in cash and 2.5 per cent in ordinary shares of Primeline issued at a deemed price per share equal to the higher of (i) the closing price of the shares on the TSX Venture Exchange on the day before; and (ii) the volume-weighted average trading price of the shares on the TSX-V for the 10 days preceding the interest payment date. The new bonds are convertible, at the option of the bondholder, at any time during the period commencing four months and a day following the date of issuance up to the date that is 10 days prior to the date of maturity of the new bonds, into shares at a conversion price of 70 cents per share. The issuance of the new bonds is subject to TSX-V approval.

The issuance of the new bonds is a "related party transaction" for Primeline within the meaning of Multilateral Instrument 61-101, in that Mr. Hwang is Primeline's president, chairman and majority shareholder. Primeline will rely on the exemption from the valuation requirement of MI 61-101 at Section 5.5(b) of MI 61-101, which it is entitled to do as none of its securities are listed on the Toronto Stock Exchange or certain other stock exchanges outside of the United States and Canada. Primeline will rely on the exemption from the minority approval requirement of MI 61-101, on the basis that (i) repayment of the Tranche A bonds, in the absence of the loan from Mr. Hwang, would have resulted in serious financial difficulty for Primeline; (ii) the loan and the issuance of the new bonds is designed to improve the financial condition of Primeline; (iii) Primeline is not insolvent; (iv) Primeline has one or more independent directors in respect of the transaction, and (v) the Primeline's board, and at least two-thirds of the independent directors, each acting in good faith, have determined that (i) and (ii) apply, and that the terms of the transaction are reasonable in the Primeline's circumstances. Primeline believes it is reasonable and necessary in the circumstances that this press release is filed less than 21 days before the loan from Mr. Hwang, as Primeline required the loan from Mr. Hwang in order to meet its urgent short-term cash requirements.

About Primeline Energy Holdings Inc.

Primeline is an exploration and production company focusing exclusively on China natural resources to become a major supplier of gas and oil to the East China market. Primeline has a 100-per-cent contractor's interest in, and is the operator of, the petroleum contract with CNOOC for block 33/07 (4,397 square kilometres) and a 49-per-cent interest in the producing LS36-1 gas field in block 25/34, together with CNOOC (51-per-cent interest and acting as operator). Both blocks are in the East China Sea. LS36-1 has been in production since July, 2014.

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