Panoro Energy ASA

M&A Activity • Nov 6, 2018

Panoro Energy Announces Agreement for the Acquisition of OMV Tunisia Upstream GmbH and Proposed Private Placement of $30 million

Panoro Energy Announces Agreement for the Acquisition of OMV Tunisia Upstream GmbH and Proposed Private Placement of $30 million

Oslo, 06 November 2018 - Panoro Energy (the "Company" or "Panoro", with OSE

ticker: "PEN") announces that its Norwegian subsidiary Panoro Tunisia Production

AS (the "Buyer") has reached an agreement (the "Agreement") with OMV Exploration

& Production GmbH ("OMV" or the "Seller") to acquire 100% of the shares of OMV

Tunisia Upstream GmbH (the "Target") for a cash consideration of $65 million

(the "Acquisition") based on an effective date of 1 January 2018. The Target

holds a 49% interest in five oil producing concessions in Tunisia with net 2P

reserves of 8.1 million barrels, and net production of approximately 2,000 bopd

from 14 wells. The Target also owns 50% of Thyna Petroleum Services S.A.

("TPS"), which serves as the operating company for the five oil producing

concessions. The Agreement entails signing of an agreed form share sale and

purchase agreement, in accordance with Austrian notarial processes, following

announcement of completion of the Private Placement described below.

The five oil producing concessions, Guebiba/El Hajib, Rhemoura, El Ain, Cercina,

and Cercina South (together, the "Concessions"), are located onshore and shallow

water offshore near to the city of Sfax, and adjacent to Panoro's operated Sfax

Offshore Exploration Permit ("SOEP") recently acquired from DNO ASA. Through

this transformational acquisition, Panoro adds high quality oil producing assets

with existing infrastructure, well managed operations and substantial upside

potential. In addition, this Acquisition further establishes Tunisia as a new

core area for Panoro and is an important step towards the Company becoming a

material, full-cycle African focused E&P independent.

The Concessions are long life and low risk producing oil fields with a stable

production history since the 1990s and contain significant amounts of oil yet to

be recovered with estimated net 2P reserves of 8.1 million barrels as of 30 June

2018 based on a competent person's report prepared by Gaffney, Cline &

Associates ("GCA"). The Concessions benefit from low operating costs of

approximately $12 per barrel, robust downside protection and attractive fiscal

terms. GCA estimates 2P NPV10 of the Target of approximately $92 million from 1

July 2018, and additionally the Target generated some $10 million in free cash

during the first half of 2018. The Buyer also inherits a significant materials

and drilling inventory valued by the Seller at $5 million as of 1 January 2018.

The remaining interest in the Concessions and TPS is held by ETAP, the Tunisian

national oil company. The Concessions are currently jointly-managed and jointly

-operated by ETAP and the Target through TPS, a long standing and respected

joint-venture operating company (the "JV"). TPS is located in the city of Sfax

and has approximately 130 employees. Panoro will have the right to appoint the

Deputy General Manager as well as the Development Manager in TPS. The future

strategy and work programme at TPS will be jointly managed by Panoro and ETAP

and the JV has already identified several opportunities to enhance production

and increase reserves from the Concessions.

Due to the location adjacent to the SOEP permit and its extensive available

infrastructure, the Concessions create a unique opportunity for Panoro to unlock

the development and exploration potential in the SOEP permit through tie-in to

the existing TPS infrastructure and pipeline system. The combination of the

Concessions and SOEP provides material synergies and visible development growth

for the aligned benefit of Panoro, ETAP and Tunisia. As announced on 31 October

2018, Panoro is planning to drill the Salloum West-1 well in the SOEP permit in

H1 2019. This well is subject to the entry into a second renewal period of the

SOEP permit for a period of 3 years. Advanced discussions for the renewal are

ongoing with Tunisian Authorities.

The purchase price to be paid to OMV is $65 million (the "Price"), with an

effective date of 1 January 2018. Panoro estimates that upon completion,

projected to take place on or about 15 December 2018, there will be a working

capital adjustment of the Price by approximately $15 million in favour of Panoro

representing the strong cash flow generation from the effective date to the

completion date. The net consideration will be financed through a combination of

debt and equity financing, and the introduction of a strategic co-investor

across Panoro's Tunisian business.

Mercuria Energy ("Mercuria"), one of the world's largest independent energy

traders, has a long term strategic relationship with Panoro, and is providing an

acquisition loan facility of $27 million to the Buyer. The loan will amortise

over a period of 5 years, and carries an annual interest rate of LIBOR plus 6%

per annum. In addition, Panoro has secured from Mercuria an additional junior

loan facility for a further $8 million, which the Buyer might decide to drawdown

at a later stage. The junior loan facility is being made available against the

issuance of $320,000 worth of Panoro shares issued in conjunction with, and in

addition to the shares issued in, the Private Placement (as defined below).

Mercuria will also provide crude oil marketing and oil hedging services to the

Buyer, as part of this transaction. Panoro and Mercuria have signed binding

commitment letter for this debt financing subject to documentation and certain

customary conditions precedent being fulfilled.

The Acquisition is being made by Panoro together with a subsidiary of Beender

Petroleum Limited ("Beender"), a privately held oil and gas company focused on

proven oil fields with upside, which is part of the Beender group of companies,

founded and fully controlled by Tunisian energy investor, Mr. Slim Bouricha.

Panoro and Beender have entered into a strategic agreement whereby they will

jointly pursue all Tunisian growth opportunities on a 60/40 basis through a new

holding company Sfax Petroleum Corporation AS ("Sfax Petroleum"), which is the

holding company of the Buyer and the recently acquired Panoro Tunisia

Exploration AS (previously DNO Tunisia AS). Under a share subscription

agreement, Beender will subscribe in cash for shares in Sfax Petroleum, on the

same terms as Panoro, giving it a 40% interest, and will fund its pro-rata share

of the Buyer's equity requirement at the completion of the Acquisition,

estimated to be $11 million. Through its subscription for shares of Sfax

Petroleum, Beender will acquire a pro rata share of all benefits and liabilities

associated with all of Panoro's Tunisian business. In conjunction with the share

subscription agreement, Panoro and Beender have agreed a shareholder agreement

which sets out the basis for the operation and governance of Sfax Petroleum.

The remaining equity financing required by the Buyer to conclude the Acquisition

is approximately $17 million which includes additional working capital

requirement at the Target. This will be provided by Panoro's 60% contribution

through Sfax Petroleum. As separately announced today, Panoro is launching an

equity private placement of $30 million (the "Private Placement") to fund its

share of the Acquisition, development capital principally for Gabon and Tunisia

and general corporate purposes, as further described in a separate press

release.

John Hamilton, Chief Executive Officer Panoro said: "Following the completion of

the DNO Tunisia AS transaction this summer, we are extremely pleased to announce

our second acquisition in Tunisia with the purchase of OMV Tunisia Upstream GmbH

from OMV. The acquired company holds high quality producing oil concessions with

low decline rates and low breakeven levels, and generate strong cash flow. The

five oil producing concessions, Guebiba/El Hajib, Rhemoura, El Ain, Cercina, and

Cercina South perfectly complement our existing business in Tunisia,

specifically the adjacent Sfax Offshore Exploration permit. This accretive

acquisition is in line with our announced strategy to expand further in Tunisia

and highlights our determination to continue building a leading international

independent exploration and production company focused on Africa".

The acquisition of the Target will trigger requirements pursuant to Oslo Børs'

Continuing Obligations to provide an Information Memorandum, which will include

pro forma financial information, within 30 trading days from this announcement.

As Panoro is also proposing the Private Placement with a repair issue offering,

which will trigger a requirement to publish a listing and offering prospectus,

Panoro expects to publish, within 30 trading days, a joint prospectus and

Information Memorandum.

Pursuant to section 3.4 of the Continuing Obligations of Oslo Børs', Panoro

hereby provides the following information as a "detailed stock exchange

announcement" summarising the main terms of the Acquisition:

-       Parties to the agreement: OMV Exploration and Production GmbH as seller,

Panoro Tunisia Production AS as buyer, and Panoro as guarantor.

-       Consideration, form and timing of settlement and financing:

· Agreed consideration of $65 million, expected to be adjusted downwards by

approximately $15 million due to working capital adjustments.

· Net consideration of approximately $50 million plus required working capital

to be financed by approximately $28 million of new equity in Sfax Petroleum and

a $27 million loan from Mercuria.

· The $28 million of new equity in Sfax Petroleum will be funded pro rata by

Panoro and Beender, with Panoro's 60% share (approximately $17 million) being

funded by net proceeds from the Private Placement.

-       Panoro expects to complete the acquisition of the Target on or about 15

December 2018, shortly after the Private Placement has been completed, however

no assurances can be given that completion will be achieved.

-       Business to be acquired and key financial information:

· Panoro newly incorporated subsidiary Panoro Tunisia Production AS will

acquire (i) 100% of the shares in the Target, which owns the Concessions (as

defined above), and (ii) 49% of the shares in the JV managing company TPS. All

employees are and will continue to be employed by TPS. The Concessions have only

recently been transferred to the Target and have previously not been subject to

separate financial reporting. The Target only has audited statutory accounts for

the year ended 31 December 2017, which included limited activity during the year

and only had net assets of EUR 25,797 and a loss for the year of EUR 9,299

resulting from recognition of the incorporation expenses.

· Since transfer of the Concessions to the Target, with effect from 1 January

2018, the following key information has been extracted, without material

adjustments, from the unaudited management accounts of the Target as of and for

the six months ended 30 June 2018:

· Net assets of $11 million

· Cash and trade receivables of $12.7 million

· After tax Profit for 1H 2018 of $4.8 million

-       Significance and strategic effects of the Acquisition are referred to

above.

-       No agreements for the benefit of members of the board or management of

Panoro or the Target have been or will be entered into in connection with the

Acquisition.

A corporate presentation is available on Panoro's website www.panoroenergy.com

and Panoro will hold a conference call for Investors at 8.30am CET on 07

November 2018. Details of the conference call will be announced and circulated

separately.

This announcement is made pursuant to section 5-12 of the Securities Trading Act

and section 3.4 of Oslo Børs' Continuing Obligations.

Enquiries:

John Hamilton, Chief Executive Officer

Qazi Qadeer, Chief Financial Officer

Tel:     +44 203 405 1060

Email: investors@panoroenergy.com

About Panoro Energy

Panoro Energy ASA is an independent E&P company based in London and listed on

the Oslo Stock Exchange with ticker PEN. The Company holds high quality

production, exploration and development assets in Africa, namely the Dussafu

License offshore southern Gabon, OML 113 offshore western Nigeria and Sfax

Offshore Exploration Permit and the Ras El Besh Concession, offshore Tunisia.

For more information visit the Company's website at www.panoroenergy.com.