Mr. Robin Auld reports

CRITERIUM ENERGY ANNOUNCES RESTRUCTURED TRANSFORMATIVE ACQUISITION OF MONT D'OR PETROLEUM LTD. AND C$15.3 MILLION FINANCING, LED BY A STRATEGIC INVESTOR

Criterium Energy Ltd. has restructured the acquisition of all the issued and outstanding shares of Mont D'Or Petroleum Ltd. (MOPL) and made a proposed amendment to the sale and purchase agreement (SPA).

Concurrently, the company has also arranged a $15.3-million (Canadian) financing led by Research Capital Corp. The financing consists of:

• An underwritten offering of 48,182,000 equity subscription receipts of the company at a price of 11 Canadian cents per equity subscription receipt for gross proceeds of approximately $5.3-million (Canadian) by way of a short form prospectus in which the company has today filed and been receipted for. The company will enter into an underwriting agreement with Research Capital Corp. as the sole underwriter and sole bookrunner 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 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 and one common share purchase warrant. Each warrant will entitle the holder to purchase one common share at an exercise price of 14 Canadian cents 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 $10-million (Canadian).

If the overallotment option (as defined herein) and the convertible loan option (as defined herein) are exercised in full for the convertible loan and public offering, the company will receive aggregate gross proceeds of approximately $17.6-million (Canadian) ($12.8-million (U.S.)).

The financing is anchored by a strategic investor participating for an aggregate of $12.5-million (Canadian), including the entirety of the $10.0-million (Canadian) convertible loan and $2.5-million (Canadian) 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. It is anticipated that the strategic investor would hold approximately 17.06 per cent of the issued and outstanding common shares and 43.32 per cent on a fully diluted basis.

Acquisition highlights:

• Stable production base and cash flow with material near-term, low-risk upside: MOPL holds 100-per-cent operating working interests in two production-sharing contracts (PSCs) in Indonesia. The Tungkal PSC, located onshore south Sumatra, and the West Salawati PSC, located in southwest Papua, collectively produce 1,050 barrels per day (bbl/d) of oil, contain aggregate 2P (proved and probable) reserves of 4.7 million barrels (mmbbl) (1) and have been independently valued at $58-million (U.S.) ($79.5-million (Canadian)) at a net present value (NPV) at 10 per cent (NPV10) after tax (1);
• Establishes Criterium as an operator in the Southeast Asia region -- a foundation for organic growth and asset consolidation: The acquisition delivers on Criterium's strategy of consolidating a balanced portfolio of low-risk producing assets with tangible reinvestment opportunities in the form of production optimization, infill drilling and stepout developments;
• Favourable acquisition metrics: The purchase price of $26.5-million (U.S.) delivers the following metrics: per flowing barrel: $25,300 per barrel of oil equivalent per day (boe/d); reserves: $5.6 per 2P barrel; reserves and resource: $2.5 per 2P-plus-2C (contingent) barrels of oil equivalent (boe); EBITDA (earnings before interest, taxes, depreciation and amortization) multiple: 1.0 times 2024 estimate of net operating income;
• Organic growth opportunities that can be realized within cash flow:
  • Immediate production optimization resulting in two to three times the production growth: Identified workover and infill drilling campaign commencing subsequent to the closing of the acquisition provides expected production of 1,400 to 1,600 bbl/d in Q1 2024. Additional workover and drilling campaign in mid-2024 is expected to increase total production to 2,200 to 2,600 bbl/d and generate $24-million (U.S.) to $30-million (U.S.) ($33-million (Canadian) to $41-million (Canadian)) EBITDA in 2024 (2) all within free cash flow;
  • Gas monetization resulting in approximately 10 million standard cubic feet per day (mmscf/d) (1,600 boe/d): Criterium intends to monetize and convert to reserves Tungkal's 20 billion cubic feet (bcf) (1) of 2C contingent resource. Gas production of up to 10 million standard cubic feet per day (1,600 boe/d) is anticipated to be under contract by 2025 (management estimate);
  • High-impact, low-cost, exploration: Total prospective resources of 29 million barrels of oil equivalent (mmboe) (1), most notably contained in the Berkas (17 billion cubic feet plus six million barrels) and Cerah (26 billion cubic feet plus seven million barrels) prospects, which are near both oil and gas transportation infrastructure, provide low cost and quick transition from discovery to production. Management intends to confirm the prospectivity within the MOPL portfolio;
• Strong cash position: Upon closing of the acquisition, the company will have a cash balance of approximately $8.2-million (U.S.) ($11.2-million (Canadian)) after partial repayment of debt with certain MOPL's existing lenders (to reduce the total debt balance outstanding following completion of the acquisition);
• Strategic shareholder: Upon closing of the acquisition and satisfaction of certain escrow release conditions, the strategic investor will own approximately 50.1 per cent of the common shares of the company, on a fully diluted basis, including the assumed conversion of the convertible loan and the exercise of the warrants (as defined herein) in the future;
• Assumption of favourable debt -- favourable weighted average interest rate of 7.95 per cent: By the end of 2024, the debt to cash flow ratio is expected to decrease to less than 0.75 times. Acquiring MOPL in consideration of assuming $25.5-million (U.S.) of outstanding debt, which Criterium will be reducing to $15.8-million (U.S.) following the closing of the acquisition through cash payments ($4.8-million (U.S.)) and conversion to equity ($2.5-million (U.S.) of common shares at closing of the acquisition and $2.4-million (U.S.) converted in 2025 (3)).

Robin Auld, chief executive officer of Criterium Energy, said:

"Mont D'Or is a foundational acquisition for Criterium and establishes our company as a reputable operator in Indonesia and Southeast Asia. By acquiring MOPL, we integrate a seasoned team, which safely operates 1,050 bbl/d that generates a stable and scalable cash flow base, which we intend to grow rapidly. With the recently announced Tungkal PSC extension to 2042, we intend to execute annual drilling programs to fully realize MOPL's potential to deliver long-term sustainable production growth within cash flow while executing on accretive value catalysts.

"The restructured acquisition will solidify our balance sheet while providing us with the ability to execute our workover and drilling campaign, resulting in production growth and value creation for our shareholders all realized within free cash flow. The financing arrangements we announce today provide flexibility to execute our ambitious growth programs within MOPL and future acquisitions in the region. We have the experienced team needed to capture these opportunities and deliver significant value for our shareholders."

Acquisition

The company will purchase all outstanding and issued shares of MOPL under the terms of the SPA. As set forth in the SPA, Criterium has committed to the following payments and issuance of securities upon closing:

1. A nominal fee of $1 (U.S.) payable to the current MOPL shareholders;
2. Issuance of common shares equivalent to $1-million (U.S.) to Tourmalet Holdings Ltd. (3);
3. A cash payment of $4.8-million (U.S.) to MOPL to be distributed to current MOPL lenders;
4. Issuance of common shares and/or convertible notes equivalent to $5.25-million (U.S.) to select MOPL lenders (3);
5. Working capital injection into MOPL of approximately $7.2-million (U.S.);
6. Current MOPL shareholders, including Tourmalet, receive contingency payments upon certain price and production thresholds (4).

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 in connection with the convertible loan pursuant to which the strategic investor will agree to advance $10-million (Canadian) in principal amount to the company. In addition, the company will issue to the strategic investor 62.5 million 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.

The convertible loan shall bear interest at a rate of 14.75 per cent 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 at a conversion price equal to 16 Canadian cents 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. The convertible loan 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 per cent to the outstanding principal amount at the time of repayment, plus any unpaid accrued interest, by giving 30 days of 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.

The company has granted the strategic investor an option, exercisable in whole or in part, at the sole discretion of the strategic investor, to increase the principal amount of the convertible loan by up to an additional 15 per cent. In addition, the company has granted the underwriter an option, exercisable in whole or in part, at the sole discretion of the underwriter, to purchase from the company up to an additional 15 per cent of the equity subscription receipts sold under the public offering, at any time, from time to time, for a period of 30 days from and including the closing of the public offering, on the same terms and conditions of the public offering to cover overallotments, if any, and for market stabilization purposes in the public offering.

Upon closing of the public offering, the net proceeds will be placed in escrow with an escrow agent and will be released to the company upon satisfaction of certain escrow release conditions and the underwriter receiving a certificate from the company prior to the termination time (as defined below) to the effect that: 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, 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 that 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; the receipt of all required shareholder and regulatory approvals, including, without limitation, the conditional approval of the TSX Venture Exchange for the acquisition; the strategic investor having completed due diligence on the company in its sole discretion, and is satisfactory; the company obtaining shareholder approval for the strategic investor to become a "control person" of the company; the issuance of the convertible loan and the loan warrants on before the closing of the acquisition; 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 the company and the underwriter having delivered a joint notice and direction to the escrow agent, confirming that the conditions set forth above have been met or waived.

If (i) the escrow release conditions are not satisfied or waived on or prior to 5 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 will be responsible to refund the gross proceeds of the public offering (including the amount of the underwriter's commission and the underwriter's expenses) without penalty or deduction to the subscribers of the offering, such that it would be the company's responsibility to return the full amount of the gross proceeds of the public offering to the holders of equity subscription receipts, together with such holders' pro rata portion of the interest earned thereon, if any.

The public offering is expected to close on or about the week of Oct. 2, 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 TSX-V.

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 Quebec) 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. The preliminary short form prospectus is available on SEDAR+.

Overview of the Tungkal PSC

MOPL holds a 100-per-cent working interest in the Tungkal PSC, which covers an area of 2,285 square kilometres and contains the Mengoepeh and Pematang Lantih oil fields that collectively produce 1,030 bbl/d and contain 4.6 million bbl 2P reserves as of Dec. 31, 2022 (1). MOPL secured an extension to the PSC to August, 2042, and the extension is in the form of the Gross Split PSC, which has a favourable contractor take and income tax rate of 40 per cent on net profits. Under the new PSC term, MOPL has committed to execute firm work commitments over the next five years, which include G&G studies, seismic acquisition and two exploration wells.

Mengoepeh field

There are 12 wells that produce 430 bbl/d (1). As of Dec. 31, 2022, the Mengoepeh field has produced 4.7 million bbl, an estimated 6-per-cent recovery factor (5). Criterium recognizes additional potential above 2P estimates, which only equate to an 11-per-cent ultimate recovery, and intends to focus its efforts on workovers of bypassed pay, infill drilling and secondary recovery techniques. Acting immediately, Criterium intends to drill three to four wells in Q4 2023/Q1 2024 and commence an annual drilling program thereafter.

Pematang Lantih field

There are 12 wells that produce 600 bbl/d (1). As of Dec. 31, 2022, the field had produced 1.8 million bbl, representing an estimated 10-per-cent recovery factor (6). As with Mengoepeh, Criterium recognizes significant potential above current 2P estimates, which result in an additional ultimate recovery of 19 per cent (5). Criterium has identified potential upside in converting former-producing wells into water injectors to increase ultimate recovery from the relatively simple faulted anticline structure.

West Salawati PSC

MOPL holds a 100-per-cent operated working interest in the West Salawati PSC, located onshore Salawati Island, covering an area of 970 square kilometres and containing the Balladewa-A (BLL-A) oil field, which currently produces approximately 20 bbl/d (1) from one well. The West Salawati PSC is a cost recovery PSC that expires in 2033. MOPL has outstanding work commitments that include two exploration wells to be drilled prior to 2026.

Prospect inventory

West Salawati contains mature prospects in both the onshore and offshore areas of the PSC. The BLL cluster located onshore has well pads prepared for drilling and, if successful, production can be handled at the BLL production facility, which is located one kilometre away and has fluid capacity in excess of 5,000 barrels per day (bbl/d). The offshore area of the PSC contains 15 prospects/leads and Criterium intends to conduct a detailed prospect and lead review and ranking in Q4 2023/Q1 2024.

Sustainability and human capital

How the company achieves results is important, and its strategy is underpinned by its commitment to support growing economies and communities by responsibly producing and developing reliable energy. Through the acquisition, Criterium will gain over 50 new team members and contractors who are aligned with its values and have demonstrated a commitment to creating a positive impact within the communities they work and live. A key element of the transition will be the integration of environmental, social and governance initiatives, including discussing how best to track and record scope 1 and 2 emissions from the company's operations, continuing the strong commitment MOPL has to community engagement, and preparing annual ESTMA reports.

Management team and directors

Datuk Brian Anderson, non-executive chairman

Mr. Anderson brings to Criterium Energy five decades of operating experience, including 16 years in Asia-Pacific. He has led large multidisciplinary operations and successfully executed safe growth strategies in developing markets. He is the former chair for the Shell Companies in Northeast Asia and prior to that he was the chair for Shell Nigeria, where he was responsible for managing over one million bbl/d of oil production and 6.4 million tonnes per annum of LNG (liquefied natural gas) export. Within Asia-Pacific, Mr. Anderson previously held the roles of managing director for Shell's E&P (exploration and production) companies in Malaysia and was general manager (GM) of development for Woodside Petroleum in Australia. After retiring from Shell, among other activities, he was a director at Toronto Stock Exchange-listed Addax Petroleum Ltd., acquired by Sinopec International Petroleum Exploration and Production Corp. for $8.27-billion. He holds a BSc in metalliferous mining engineering and an MSc in petroleum reservoir engineering.

Michele Stanners, non-executive director

Ms. Stanners is a strategic adviser and results-orientated board member, bringing corporate governance, audit and financial oversight for TSX-listed, private and not-for-profit entities. She has held executive leadership roles, including business and policy development, with extensive experience working with indigenous peoples. Ms. Stanners holds a masters in theological studies from Harvard University and an MBA and a law degree from the University of Alberta, is an active member of the International Women's Forum, and is a past board member for Softrock Minerals from 2015 to 2022 and Mount Royal University from 2017 to 2020.

David Dunlop, non-executive director

Mr. Dunlop is currently senior manager, controller of the transmission business unit, at Pembina Pipeline. His prior roles include vice-president of finance at Veresen Inc., and VP controller and VP of planning and process improvement at Talisman Energy. Mr. Dunlop has a comprehensive understanding of financial controls and procedures required for a listed Canadian international energy company operating in Southeast Asia. Further, he has successfully led global finance teams through business acquisitions and integrations. Mr. Dunlop is a chartered accountant (CA) and a certified financial analyst (CFA) charterholder, and holds an MBA from Kellogg Schulich School of Business and an ICD.D designation from the Institute of Corporate Directors.

Robin Auld, chief executive officer and director

Mr. Auld is the founder of Criterium Group and for over 20 years has specialized in leading organizations through mission-critical initiatives and periods of transformational change. Mr. Auld will apply decades of strategic advisory and capital market experience to execute Criterium Energy's strategy and maintain the access to capital necessary to realize the company's objectives. His energy experience is rooted in strategic, commercial and operational advisory services to several of Canada's largest upstream and mid-stream companies, including three years with Talisman Energy Asia-Pacific. He holds an engineering degree from the Royal Military College of Canada and an MBA from Queen's University, and is a registered engineer with APEGA. Mr. Auld is a former chairman and CEO of North American Gem, and a former chief technology officer of TransAKT.

Matthew Klukas, chief operating officer

Mr. Klukas has worked Asia-Pacific upstream energy since his career began as a geophysicist in 2008 with Talisman Energy. Since then, he has held technical, business development, asset management and operational roles within the energy sector in ASEAN and Canada with large multinational companies, junior transitional energy companies and power generators. Within Criterium Energy, he will bring asset specific knowledge and leadership to the company's operations and strong relationships in ASEAN. Mr. Klukas holds a BSc in geophysics from the University of Alberta and an MBA from University of Calgary, and is a registered geoscientist with APEGA.

Dr. Henry Groen, chief financial officer

Dr. Groen is the former VP and deputy general manager for Talisman Vietnam and Truong Song Joint Operating Company, and assistant general manager for Talisman Asia Ltd. He has held various managerial and financial roles in ASEAN, and brings a first-hand understanding of the financial and accounting controls required for a Canadian company operating in ASEAN. He holds a doctorate in business administration from the University of Newcastle, New South Wales, with a thesis based on corporate social responsibility within the energy sector in ASEAN, and an MBA from Athabasca University. He is a chartered professional accountant (CMA).

Hendra Jaya, president, director, Indonesia

Mr. Jaya is the former president director for PT Pertamina Gas, president director of PT Nusantara Regas and general manager for JOB Pertamina-Medco Tomori. After a distinguished 30-year career with Pertamina, he will now be responsible for Criterium Energy's operations in Indonesia, which will benefit from his strong leadership and technical skills as it relates to managing multidisciplinary and multinational teams in both onshore and offshore operating environments. Mr. Jaya holds a BEng in mining engineering from the Bandung Institute of Technology and an MBA from Prasetiya Mulya Business School, and completed the Stanford School of Business leadership and development program.

Andrew Spitzer, VP, corporate development

Mr. Spitzer has 15 years of progressive oil and gas experience, beginning his career at Talisman Energy. He has held roles in asset operations, business development and corporate planning teams, leading Talisman/Repsol as the manager of North American special projects with a focus on opportunities to improve natural gas margins throughout the value chain. He has led teams responsible for capital budgeting, reserves/impairment valuations, process implementations and strategic planning across North America. Mr. Spitzer holds a BComm in finance from the University of Calgary.

Additions to board of directors

Upon satisfaction of the escrow release conditions, the strategic investor will be entitled to nominate one representative to be appointed to the board of directors of the company and subsequently have two nominees stand for election to the board at the next annual meeting of the shareholders of the company. In the event that its nominees are not duly elected to the board, the board shall appoint one nominee or a replacement to such nominee designated by the strategic investor as an additional director of the company.

Approvals and conditions to closing

The acquisition constitutes a transfer of shares, which causes change in the indirect control, and, under MEMR Regulation 48/2017, Criterium will subsequently notify MEMR via SKK MIGAS upon closing of the transaction. MOPL has submitted notification of the proposed indirect change of control as required under the terms of the Tungkal PSC.

The acquisition is subject to Criterium successfully completing the financing and receiving TSX-V approval for the acquisition. The acquisition and financing may constitute a reverse takeover under TSX-V Policy 5.2. It is anticipated that Criterium will be seeking an exemption from the sponsorship requirements of the TSX-V.

About Criterium Energy Ltd.

Criterium Energy is an upstream energy company focused on the acquisition and sustainable development of assets in Southeast Asia that can deliver scalable growth and cash generation. The company focuses on maximizing total shareholder return by executing on three strategic pillars, namely: (i) successful and sustainable reputation; (ii) innovation and technology arbitrage; and (iii) operational and safety excellence.

(1) Reserve report commissioned by MOPL and prepared by ERCE Ltd. dated May 16, 2023, with effective date of Dec. 31, 2022, which was prepared in accordance with the definitions, standards and procedures contained in the Canadian National Instrument 51-101, Standards of Disclosure for Oil and Gas Activities. Gross reserves and resources are the working interest share of reserves and resources and are prior to the application of the contractual terms of the PSC. Stated production data are as of Dec. 31, 2022.

(2) EBITDA projections are based on 2P reserve report case for 2024 with management estimate for phased activity (reserve report states $11-million (U.S.) EBITDA for 2023 and $37-million (U.S.) EBITDA for 2024).

(3) Common shares issued to Tourmalet are in satisfaction of the fee payable by MOPL to Tourmalet for negotiating writedowns to current MOPL lenders and will be issued at the lower of the equity subscription receipt issue price or the 10-day VWAP (volume-weighted average price) prior to closing. The common shares issued to the lenders in exchange for debt ($2.5-million (U.S.)) will be issued at the equity subscription receipt issue price. The convertible shares issued to the lenders will convert $2.4-million (U.S.) of existing debt and an additional $350,000 (U.S.) to common shares in 2025 at an issue price equivalent to the 20-day VWAP on May 31, 2025.

(4) The contingency payments are calculated and paid semi-annually and are based on asset performance and commodity price, specifically: (i) oil production payment of $3 (U.S.) per barrel of incremental production above 1,200 bbl/d when ICP is greater than $80 (U.S.) per bbl and less than $90 (U.S.) per bbl or $7.5 (U.S.) per bbl of incremental production above 1,200 bbl/d when ICP is greater than $90 (U.S.) bbl; (ii) oil price payment payable if average daily production exceeds 1,200 bbl/d and if ICP is greater than $100 (U.S.) per bbl (The contingency payment is $1 (U.S.) per bbl and increases by $1 (U.S.) per bbl for every $10 (U.S.) increase of ICP above $100 (U.S.) per bbl.); and (3) gas production contingency payment equal to 1.82 per cent of gross revenue from third party gas sales.

(5) Based on the base case STOIIP (stock tank oil initially in place) contained in the reserve report.

We seek Safe Harbor.