Oronova Energy Announces Proposed $45 Million Financing and Amends Agreement to Acquire Producing Gas and Condensate Asset in Guatemala

 

Highlights:

• Oronova Energy Inc. signs amendment to agreement to acquire producing gas condensate asset in Guatemala
• Oronova announces C$45 million equity financing

CALGARY, June 20, 2017 /CNW/ - Oronova Energy Inc. ("Oronova" or the "Company") (TSX.V: ONV), a company focused on oil and gas exploration and production in Latin America, is pleased to announce an amendment to the definitive Purchase & Sales Agreement dated April 1, 2017 (the "Purchase & Sale Agreement" or "PSA") for the acquisition of the Production Sharing Contract of Block 1-2006 in Guatemala announced on April 10, 2017 (the "Acquisition") and a proposed private placement (the "Private Placement") of up to 112,500,000 subscription receipts (the "Subscription Receipts") of a subsidiary of Oronova ("SubCo") at a price of C$0.40 per Subscription Receipt (the "Issue Price") for total gross proceeds of C$45 million.

The Acquisition

Oronova has signed an amendment to the definitive Purchase & Sale Agreement in relation to the Acquisition, with City Peten S. DE RL ("City Peten"), an arms-length oil and gas exploration and production company existing under the laws of the Republic of Panama with a branch registered under the laws of Guatemala.

The effective purchase price for Block 1-2006 will be paid in a combination of cash and Oronova shares ("Oronova Shares" or "Common Shares"). Oronova will issue to City Peten 131,200,000 Common Shares. These shares will be subject to the standard TSXV escrow agreement and also a minimum one year hold period. Oronova will also pay cash consideration of US$5 million at closing and, at the first anniversary of the closing date, City Peten will have the option to receive an additional cash consideration of C$5 million or a number of Common Shares of Oronova equal to C$5 million divided by the Issue Price.

Strategic Rationale

The Acquisition provides Oronova an opportunity to acquire a producing gas condensate asset with significant development and exploration upside, in a growth market with a high regional demand for power and refined petroleum products.The following discusses some of the benefits of the Acquisition:

• Near-term capital initiatives drive significant incremental cash flow
• Installation of a gas sweetening plant to sell gas for power generation into the local market; presently, produced gas is flared.
• Installation of a condensate sweetening plant to receive condensate pricing at an estimated 1.1 to 1.3 times WTI.
• Installation of a topping plant by mid-2018 to refine liquid products and more than double the current sale price of the condensates (estimated to be up to 1.7 times WTI).
  
• Multiple high quality drilling opportunities
• 3 well locations identified in existing reservoir; wells will be drilled over the next two years and are expected to deliver 1,000 boe/day each, with total company production expected to reach 4,700 boe/d by 2019¹.
  
• High regional demand for gas and refined petroleum products
• Guatemala imports nearly 100% of its refined products (mostly from the US Gulf Coast), estimated at more than 100,000 barrels/day. Neighboring Central American countries also import considerable volumes of refined petroleum products and represent a potential future market.
• Guatemala generates just under half of its electricity from diesel and coal. This new gas condensate discovery is well positioned to replace diesel and coal with a cleaner, more cost effective and environmentally friendly product.
• Guatemala is also connected to the Central American electricity transmission system and is therefore well positioned to export power surplus to its requirements.
  
• Significant upside
• Resource potential has been recognized in an undrilled fault block immediately west of the Ocultun producing reservoir, and also in the deeper Todos Santos Formation.The Todos Santos extends into the block from Mexico, where it is a proven prolific oil producer. McDaniel resource report at February 28, 2017¹ indicates a total mean unrisked prospective resource estimate of 41.1 mmboe and mean risked prospective resource estimate of 11.9 mmboe.
• Oronova has a right of first refusal to acquire up to 100% working interest in Block 1-2011 which is currently operated and wholly owned by City Peten; this exploration Block is located adjacent to the east side of Block 1-2006 containing the Ocultun Field and is interpreted to have the same structural setting and prolific reservoirs as proven in Block 1-2006.

Asset Summary

Acquisition Metrics⁴

Private Placement

Oronova has engaged Peters and Co. Limited ("Peters & Co.") as lead agent in connection with C$40 million principal amount of the Private Placement on a fully-marketed and "best efforts" private placement basis (the "Brokered Private Placement"). As part of the Private Placement, the Company will concurrently complete, on a private basis, a non-brokered private placement to certain officers, directors, and employees of the Company, and certain outside parties for up to a minimum of C$5 million.

Coincident with the Acquisition, (i) the Subscription Receipts will be exchanged for common shares of SubCo ("SubCo Shares"); (ii) SubCo will be amalgamated with Oronova; and (iii) as a result of the amalgamation, former holders of SubCo Shares will receive Oronova Shares on a one for one basis, such that the subscribers will, on closing, receive free trading Oronova Shares.

Each Subscription Receipt represents the right to receive, at no additional cost, one (1) SubCo Share (to be exchanged for one (1) Oronova Share as described above) on satisfaction of certain release conditions.

The gross proceeds of the Private Placement are to be deposited in escrow at closing pending satisfaction of applicable escrow release conditions (the "Escrow Release Conditions"), which include: i) there being no impediment to completion of the Acquisition, other than the payment of the purchase price; ii) the Company has received and agreed to an executed term sheet from an acceptable lending institution for the provision of a loan facility to the Company for loan proceeds not less than C$20 million, or the Company has otherwise raised sufficient proceeds to fund the lending shortfall; and iii) the Common Shares issuable in exchange for the SubCo Shares issuable on conversion of the Subscription Receipts are immediately free trading upon completion of the Acquisition.

The Private Placement is anticipated to close on or about August 17, 2017, or such later date as the Company and Peters & Co. may agree. If the Escrow Release Conditions are not satisfied prior to October 31, 2017, the aggregate subscription price for the Subscription Receipts issued under the Private Placement will be returned to the holders thereof on a pro rata basis.

In connection with the Brokered Private Placement, Oronova has agreed to pay cash commission equal to 6.0% of the gross proceeds of the Brokered Private Placement.

The net proceeds from the Private Placement will be used to complete the Acquisition, and for future drilling, infrastructure development and general corporate purposes.

For more information, please refer to the Company's investor presentation at www.oronovaenergy.com.

On behalf of the Board of Oronova Energy Inc.

"Ralph Gillcrist"

President & CEO

About Oronova Energy Inc.

Oronova Energy Inc. is an international oil and gas exploration and production company currently focused on the development of the Ocultun Field in Guatemala which is expected to provide a strong platform for low-risk growth and value creation for shareholders. Oronova's strategy is to build a portfolio of early producing assets, that under a low cost operating approach, with associated exploration upside, will allow Oronova to create significant near-term and medium-term growth, whilst becoming a Central and South America low cost oil and gas producer, that operates to international EH&S and CSR standards and highest standards of corporate governance and ethical standards.

Forward Looking Statements and Legal Advisories

Neither the TSX Venture Exchange nor its Regulation Services Provider (as such term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.

This news release contains certain forward-looking information, forward-looking statements and forward-looking financial outlook (collectively, "forward-looking statements") under the meaning of applicable securities laws, including Canadian Securities Administrators' National Instrument 51-102 - Continuous Disclosure Obligations. The use of the words "expects", "planned", "believes", "anticipates", "estimated", "will", "potential", "may", "continue", derivations of these words and similar expressions are intended to identify forward-looking statements. In particular, but without limiting the foregoing, forward-looking statements include statements regarding: expected cost savings and expense optimization resulting from Oronova's cost saving initiatives and future initiatives; exploration and production, drilling and testing expectations, including without limitation, the timing of operations, and expectations with respect to the results of drilling, testing and exploration activities; Oronova's planned capital program and the allocation of capital, including expected funding of the capital program from proceeds expected to be derived from fund raising activities, current production and gas/condensate price levels; Orono

3..va's production expectations, projections and average production rates including the anticipated product mix of such production; Oronova's planned operations and the anticipated results of such operations, together with all other statements regarding expected or planned development, testing, drilling, production, expenditures or exploration, or that otherwise reflect expected future results or events.BOE production and reserve values are calculated on an Mcf to BOE conversion of 6 to 1.A BOE conversion of 6 to 1 is based on an energy equivalent conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead.

The forward-looking statements contained in this news release reflect several material factors and expectations and

++assumptions of Oronova including, without limitation, the anticipated accuracy of testing and production results and seismic data, pricing and cost estimates, production decline rates, commodity price levels, the effects of drilling down-dip, the effects of any potential waterflood and multi-stage fracture stimulation operations, the general continuance of current or, where applicable, assumed operational, regulatory and industry conditions and the ability of Oronova to execute its current business and operational plans in the manner currently planned. Oronova believes the material factors, expectations and assumptions reflected in the forward-looking statements are reasonable at this time but no assurance can be given that these factors, expectations and assumptions will prove to be correct.

The forward-looking statements contained in this news release are subject to risks, uncertainties and other factors that could cause actual results or outcomes to differ materially from those contemplated by the forward-looking statements, including, among others: Oronova's operations are currently located in Central America where unexpected problems can arise due to labor disruptions, technical difficulties and operational difficulties which may impact its testing and drilling operations, and the production, transportation or sale of its products, including the costs thereof; geographic, political, regulatory and weather conditions can impact testing and drilling operations and the production, transportation or sale of its products; permits and approvals from regulatory and governmental authorities may not be received in the manner or on the time lines expected or at all; and the risk that current global economic and credit market conditions may impact oil prices and oil consumption more than Oronova currently predicts, which could cause Oronova to modify its appraisal/development, production and future exploration activities and including, drilling and/or construction activities. Although the current capital spending program of Oronova is based upon the current expectations of the management of Oronova, there may be circumstances in which, for unforeseen reasons, a reallocation of funds may be necessary as may be determined at the discretion of the Oronova senior management and Board of Directors. Should any one of a number of issues arise, Oronova may find it necessary to modify its current business strategy and/or capital spending program.

Accordingly, readers should not place undue reliance on the forward-looking statements contained herein. Further information on potential factors that could affect Oronova will be included in risks detailed from time to time in Oronova's filings. These filings will be available on a website: SEDAR at www.sedar.com. The forward-looking statements contained herein are expressly qualified in their entirety by this cautionary statement. The forward-looking statements included in this press release are made as of the date of this press release and Oronova disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as expressly required by applicable securities legislation.

SOURCEOronova Energy Inc.

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