Mr. Robin Auld reports

CRITERIUM ENERGY ANNOUNCES TRANSACTION UPDATES IN CONNECTION WITH THE ACQUISITION OF MONT D'OR PETROLEUM LTD.

Criterium Energy Ltd. has entered into an amended sale and purchase agreement (SPA) dated Dec. 18, 2023, in connection with the previously announced acquisition of all the issued and outstanding shares of Mont D'Or Petroleum Ltd. (MOPL).

Positive updates to revised Mont D'Or transaction:

• Improved transaction terms: Completion payment for the acquisition reduced by 60 per cent to $4.5-million (U.S.). Reduced payment means the entirety of net equity proceeds will finance Criterium's drilling program in the first half of 2024 with no overall change to available working capital.
• Reduced financing requirement and reduced dilution for shareholders: Restructured transaction eliminates the need for the previously announced convertible loan financing which held significantly higher cost of capital, this results in a 40-per-cent reduction in fully diluted share count and $1.3-million (U.S.) in annual interest savings.
• Accelerated deleveraging plan: At closing of the acquisition, net debt will be $17-million (U.S.) with further reduction to approximately $8-million (U.S.) upon Criterium exercising its repayment option to MOPL's existing lenders, which will trigger lender writedowns in Q1 2024, resulting in 36 per cent less total debt as compared with the previous transaction structure. The company anticipates year-end (YE) 2024 debt-to-cash flow (D/CF) of approximately 0.4 times and a net cash position in Q4 2025. The restructured debt provides a favourable 7.95-per-cent interest rate.
• Strong working capital position: Approximately $8-million (U.S.) working capital in pro forma MOPL, financed by: (i) the equity financing upon the release from escrow of the subscription receipts of Criterium that were issued pursuant to the previously completed public offering; and (ii) the existing working capital in MOPL, collectively providing sufficient resources to execute a low-risk development program resulting in material production growth in 2024.
• Preliminary 2024 guidance:
  1. Executing low-risk development program resulting in 1,800 barrels per day to 2,200 bbl/d by year-end 2024:
     • Low-cost workover program: Utilize on-site service rig to perform identified workovers and production optimization.
     • Execute identified infill well program: Drill four to five wells in the Mengoepeh field, each of which payback in six to 12 months.
  2. Progressing monetization of over 20 bcf (billion cubic feet) of contingent gas resource:
     • Finalize plan of development and gas sales agreement in 2024, resulting in an anticipated upgrade from contingent resource to reserves.
     • Utilize existing infrastructure to achieve initial production in 2025.
• Forecasted $20-million (U.S.) operating cash flow in 2024: Equivalent to 20 cents/share.
• Mont D'Or provides a proven operating team with long-life assets:
  • Cohesive team with a record of safe and efficient operations.
  • Pproved plus probable (2P) reserves of 4.7 MMbbl (million barrels) represents approximately 10-per-cent recovery factor. Nearby fields from similar reservoirs can produce up to 30 per cent with secondary recovery techniques (for example, waterflood or chemical injection).
  • Contingent resources (2C) of three MMbbl oil and 20 bcf of gas.
  • High-impact stepout exploration adjacent to underutilized infrastructure.
  • The recently extended Tungkal PSC expires in 2042.
• Supportive government: The government of Indonesia has set domestic production targets of one million bbl/d and 12 bcf/d by 2030, a 63-per-cent and 100-per-cent increase from 2022 levels.
• An underfocused Southeast Asia region suitable for consolidation: Undercapitalized assets combined with supportive fiscal terms and limited competition creates an arena primed for consolidation. Criterium's extensive experience in the region has the company well positioned to be the consolidator of choice.

The company believes this revised capital structure combined with interest savings will deliver new and current shareholders superior returns going forward, and allow the company more flexibility with less dilution, delivering a stronger balance sheet. The revised financing is expected to drive strong per share accretion into 2024 and beyond, while also providing a more resilient free cash flow stream.

Amendments to acquisition

The company will purchase all outstanding and issued shares of MOPL under the terms of the amended SPA. The company expects that the closing of the acquisition to be on or before Jan. 4, 2024. As set forth in the amended SPA, Criterium has committed to the following payments and issuance of securities upon closing:

1. A $1 (U.S.) payment to current MOPL shareholders;
2. Issuance of common shares equivalent to $900,000 (U.S.) to Tourmalet Holdings Ltd.;
3. Working capital injection of $4.5-million (U.S.);
4. Issuance of common shares and/or convertible notes equivalent to approximately $5.2-million (U.S.) to select MOPL lenders; and
5. Current MOPL shareholders, including Tourmalet, receive contingency payments upon certain price and production thresholds.

Criterium holds an option, to be exercised at the company's discretion, to make a $5.5-million (U.S.) cash payment to the debt holders by March 31, 2024, in exchange for $3.1-million (U.S.) of writedowns. After the optional debt payment and writedowns, gross debt will equal approximately $16-million (U.S.). Criterium intends to finance the optional debt payment from cash on the company's balance sheet. The company had previously provided an additional non-refundable deposit of $200,000 (U.S.) under an amendment to the SPA dated Oct. 26, 2023.

Financing

The company is proceeding with securing the release of the escrowed proceeds from the offering that was completed on Nov. 7, 2023, and deposited into escrow. The offering was led by Research Capital Corp. as the sole underwriter and sole book runner. The revised transaction terms of the acquisition will allow Criterium to move forward in closing the MOPL transaction without the requirement of the convertible loan agreement as previously announced. As a result of the restructured transaction structure, the company will be seeking amendments to the escrow release conditions as set forth in the subscription receipt agreement dated Nov. 3, 2023, under the offering.

Approvals

The acquisition is subject to Criterium receiving TSX Venture Exchange approval for the acquisition. The acquisition constitutes a fundamental transaction under TSX Venture Exchange Policy 5.3, and the company has provided the necessary documentation to receive the required TSX-V approval.

In Indonesia, the acquisition is classified as an indirect change of control and all required notifications have been submitted to the necessary authorities.

Bulu transaction

The company had previously entered into a letter of intent for the arm's-length sale of its wholly owned subsidiary, which holds a 42.5-per-cent non-operated working interest in the Bulu PSC, which will have an effective date of July 1, 2023. The total cash consideration to the company from the Bulu transaction will be $7.75-million (U.S.) (equivalent to approximately $10,516,000), with $2-million (U.S.) ($2,714,000) received as a non-refundable deposit upon signing of the definitive agreement and the remaining $5.75 million (U.S.) ($7,802,000) due upon closing, which is expected in Q1 2024.

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: (1) successful and sustainable reputation; (2) innovation and technology arbitrage; and (3) operational and safety excellence.

We seek Safe Harbor.