JX Energy Ltd. - Proxy Solicitation & Information Statement 2021

THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

If you are in doubt as to any aspect of this circular or as to the action to be taken, you should consult a stockbroker or other registered dealer in securities, bank manager, solicitor, professional accountant or other professional adviser.

If you have sold or transferred all your shares in Persta Resources Inc., you should at once hand this circular with the accompanying form of proxy to the purchaser or the transferee or to the bank, stockbroker or other agent through whom the sale or transfer was effected for transmission to the purchaser or the transferee.

This circular is for your information purposes only and does not constitute an invitation or offer to acquire, purchase or subscribe for the shares or other securities of Persta Resources Inc.

Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong Limited take no responsibility for the contents of this circular, make no representation as to its accuracy or completeness and expressly disclaim any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this circular.

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PERSTA RESOURCES INC.

(incorporated under the laws of Alberta with limited liability)

(HK stock code: 3395)

Suite 3600, 888-3rd Street SW, Calgary, Alberta T2P 5C5, Canada

Telephone: 1-403-355-6623 Fax: 1-403-440-1206

CONNECTED TRANSACTION PROPOSED ISSUE OF NEW SHARES TO CONNECTED PERSON UNDER SPECIFIC MANDATE

Independent Financial Adviser to the Independent Board Committee and the Independent Shareholders

NOTICE OF MEETING and MANAGEMENT INFORMATION CIRCULAR and

PROXY STATEMENT

with respect to the

Special Meeting of Shareholders

to be held on October 15, 2021 at 9:00 a.m. (Calgary time)/11:00 p.m. (Hong Kong time) at Suite 3600, 888-3rd Street SW, Calgary, Alberta T2P 5C5, Canada

Dated: September 17, 2021

Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong Limited take no responsibility for the contents of this notice, make no representation as to its accuracy or completeness and expressly disclaim any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this notice.

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Persta Resources Inc.

(incorporated under the laws of Alberta with limited liability)

(Stock Code: 3395)

NOTICE OF SPECIAL MEETING

OF SHAREHOLDERS TO BE HELD ON OCTOBER 15, 2021 AT 9:00 A.M. (CALGARY TIME)/11:00 P.M. (HONG KONG TIME)

NOTICE IS HEREBY GIVEN that a special meeting (the ‘‘Meeting’’) of the holders (the ‘‘Shareholders’’) of common shares (the ‘‘Common Shares’’) of Persta Resources Inc. (‘‘Persta’’ or the ‘‘Company’’) will be held at Suite 3600, 888-3rd Street SW, Calgary, Alberta T2P 5C5, Canada, on October 15, 2021 at 9:00 a.m. (Calgary time)/11:00 p.m. (Hong Kong time) for the following purposes:

to consider, and if thought advisable, approve, confirm and ratify the subscription agreement dated June 8, 2021 entered into between the Company and 大連永力石油化工有限公司 (Dalian Yongli Petrochemical Ltd.*) (‘‘Dalian Yongli’’) (as amended and supplemented by the amended and restated subscription agreement dated July 20, 2021 entered into between the Company and Dalian Yongli and the amended and restated subscription agreement dated September 3, 2021 entered into between the Company and Dalian Yongli), pursuant to which the Company has conditionally agreed to allot and issue, and Dalian Yongli has conditionally agreed to subscribe for, 20,000,000 new Common Shares at HK$0.80 per Common Share, and 35,000,000 new Common Shares at the higher of (i) HK$0.80, and (ii) the volume weighted average price per Common Share as quoted on The Stock Exchange of Hong Kong Limited (the ‘‘Stock Exchange’’) for the 30 days on which the Stock Exchange is opened for business immediately preceding the date on which the Company receives an irrevocable notice from Dalian Yongli notifying the Company that Dalian Yongli will make payment for the second tranche of 35,000,000 Common Shares in full (collectively, the ‘‘Subscription Shares’’) (a copy of the Dalian Yongli Subscription Agreement and the Amended and Restated Dalian Yongli Subscription Agreement having been produced to this Meeting and marked ‘‘A’’ and ‘‘B’’ and initialed by the chairman of this Meeting for identification purpose), and the transactions contemplated thereunder, as more particularly described in the accompanying management information circular (the ‘‘Circular’’);
conditional upon the Stock Exchange granting the listing of and permission to deal in the Subscription Shares on the Stock Exchange, to consider, and if thought advisable, pass, with or without variation, an ordinary resolution granting the board of directors of the Company a specific mandate from the Shareholders approving the allotment and issuance of the Subscription Shares (the ‘‘Specific Mandate’’), provided that the Specific Mandate shall be in

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addition to, and shall not prejudice nor revoke any existing or such other general or specific mandates which may from time to time be granted to the directors of the Company prior to the Meeting; and

to transact such further or other business as may properly come before the Meeting or any adjournment or adjournments thereof.

The Circular which provides additional information relating to the matters to be dealt with at the Meeting will be despatched to Shareholders on or before September 17, 2021.

An explanatory statement as required by the Rules Governing the Listing of Securities on The Stock Exchange (the ‘‘Listing Rules’’), providing the requisite information regarding the grant of the Specific Mandate reasonably necessary to enable the Shareholders to make an informed decision on whether to vote for or against the resolution relating to the Specific Mandate at the Meeting is set forth in the Circular.

Only Shareholders of record as at 4:30 p.m. (Hong Kong time) and 2:30 a.m. (Calgary time) on September 24, 2021 (the ‘‘Record Date’’) will be entitled to vote at the Meeting, unless that Shareholder has transferred any Common Shares subsequent to that date and the transferee Shareholder, not later than 10 days before the Meeting, establishes ownership of the Common Shares and demands that the transferee’s name be included on the list of Shareholders entitled to vote at the Meeting, in which case such transferee shall be entitled to vote such Common Shares at the Meeting. To ensure that there is no risk that any of the Common Shares will be voted twice, the transferee must provide written evidence to the Company including, without limitation, providing properly endorsed certificates evidencing the transfer of such Common Shares or having otherwise established ownership of such Common Shares, written evidence of the identification of the relevant transferor and written evidence that the relevant transferor has not exercised and will not exercise their right to vote either by proxy or in person at the Meeting. The Company may refuse the demand by a transferee to be included in the list of Shareholders entitled to vote at the Meeting if the transferee cannot demonstrate to the Company with sufficient certainty that the relevant Common Shares have not already been voted by proxy or will be voted by the relevant transferor at the Meeting.

Shareholders who receive the Circular and other accompanying Meeting materials from the Company’s branch share registrar in Hong Kong, being Computershare Hong Kong Investor Services Limited, and who are unable to be present at the Meeting are requested to date and sign the form of proxy enclosed in the Circular and return it to Computershare Hong Kong Investor Services Limited at 17M Floor, Hopewell Centre, 183 Queen’s Road East, Wan Chai, Hong Kong, in the enclosed envelope provided for that purpose, so that it is received during regular business hours no later than 48 hours (excluding Saturdays, Sundays and public holidays in Hong Kong) prior to the time of the Meeting, or any adjournment thereof. If a Shareholder is registered as a member of the Company on the register of members in Hong Kong on the Record Date, such Shareholder’s records are currently maintained on the Hong Kong register and such Shareholder’s proxy should be deposited in accordance with the instructions set out in this paragraph.

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Shareholders who receive the Circular and other accompanying Meeting materials from the Company’s principal share registrar in Canada, being Computershare Trust Company of Canada, and who are unable to be present at the Meeting, are requested to date and sign the form of proxy enclosed in the Circular and return it to Computershare Trust Company of Canada, Proxy Department, 100 University Avenue, 8th Floor, Toronto, Ontario M5J 2Y1, Canada, in the envelope provided for that purpose, so that it is received no later than 48 hours (excluding Saturdays, Sundays and holidays in Canada) prior to the time of the Meeting or any adjournment thereof. Registered shareholders may submit their voting instructions online at www.investorvote.com or by phone at 1-866-732-VOTE (8683) (toll free within North America) or 1-312-588-4290 (outside North America). Shareholders are cautioned that the use of mail to transmit proxies is at each Shareholder’s risk. If a Shareholder acquired its Common Shares prior to the Record Date and is registered as a Shareholder on the register of Shareholders in Canada on the Record Date, such Shareholder’s records are currently maintained on the Canadian register and such Shareholder’s proxy should be deposited in accordance with the instructions set out in this paragraph.

In order to be valid, your proxy or voting instructions must be received in each case no later than 48 hours (excluding Saturdays, Sundays and holidays) before the Meeting or any adjournment thereof.

DATED at Calgary, Alberta, as of the Friday of September 17, 2021.

For identification purpose only.

BY ORDER OF THE BOARD

Signed: ‘‘Yongtan Liu’’ Yongtan Liu Chairman of the Board

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LETTER FROM THE BOARD

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PERSTA RESOURCES INC.

(incorporated under the laws of Alberta with limited liability)

(Stock Code: 3395)

Executive Directors Registered Office Mr. Yongtan Liu (Chairman) 15th Floor, Bankers Court Mr. Pingzai Wang (Chief Executive Officer) 850-2nd Street SW Calgary, Alberta T2P 0R8 Independent Non-Executive Directors Canada Mr. Richard Dale Orman Mr. Peter David Robertson Principal Place of Business in Hong Kong Mr. Larry Grant Smith Room 1901, 19/F Lee Garden One 33 Hysan Avenue Causeway Bay Hong Kong

September 17, 2021

To: the Shareholders

Dear Sirs/Mesdames,

(1) CONNECTED TRANSACTIONS IN RELATION TO THE ISSUE OF SHARES TO CONNECTED PERSON UNDER SPECIFIC MANDATE; AND (2) NOTICE OF SPECIAL MEETING

INTRODUCTION

Reference is made to the announcements of the Company dated June 9, 2021, June 10, 2021, July 21, 2021 and September 3, 2021 in relation to, among other things, the entering into of the Dalian Yongli Subscription Agreement and the Supplemental Agreements.

The purpose of this Circular is to provide the Shareholders with, among other things: (i) a letter from the Board containing further details of the Dalian Yongli Subscription Agreement (as amended and supplemented by the Supplemental Agreements) and the transactions contemplated thereunder; (ii) a letter of advice from the Independent Board Committee to the Independent Shareholders; (iii) a letter of advice from the Independent Financial Adviser to both the Independent Board Committee and the Independent Shareholders; (iv) a notice convening the Meeting; and (v) other information as required under the Listing Rules.

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DEFINITIONS

In this Circular, unless the context otherwise requires, the following expressions have the following meanings:

‘‘ABCA’’ Business Corporations Act (Alberta), as amended, supplemented or as otherwise modified from time to time; ‘‘associate’’ has the meaning ascribed to it under the Listing Rules; ‘‘Board’’ the board of the Directors; ‘‘C$’’ Canadian dollars, the lawful currency of Canada; ‘‘Canada’’ Canada, its territories, its possessions and all areas subject to its jurisdiction; ‘‘CCJGSA’’ 長春市吉星車用氣有限公司 (Changchun City Jixing Gas Service for Auto Co. Ltd.*), a company incorporated under the laws of PRC with limited liability and owned as to 66.70% and 33.30% by Mr. Liu and Ms. Zhang Lijun (Mr. Liu’s spouse), respectively;

‘‘Circular’’ this management information circular;
‘‘Company’’ Persta Resources Inc., a company incorporated under the laws of the Province of Alberta on March 11, 2005 and whose shares are listed on the Main Board of the Stock Exchange (Stock Code: 3395);
‘‘Completion’’ the completion of the subscription of new Common Shares under the Dalian Yongli Subscription Agreement (as amended and supplemented by the Supplemental Agreements);
‘‘Common Share(s)’’ the common share(s) of no par value in the capital of the Company;
‘‘connected person(s)’’ has the meaning ascribed to it under the Listing Rules;
‘‘Dalian Yongli’’ 大連永力石油化工有限公司 (Dalian Yongli Petrochemical Ltd.*), a company incorporated under the laws of PRC with limited liability;
‘‘Dalian Yongli Subscription the subscription agreement dated June 8, 2021 entered into Agreement’’ between the Company and Dalian Yongli in relation to the subscription of the Subscription Shares by Dalian Yongli;

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‘‘Director(s)’’
‘‘First Amended and Restated Dalian Yongli Subscription Agreement’’
‘‘HK$’’
‘‘Hong Kong’’
‘‘Independent Board Committee’’
‘‘Independent Financial Adviser’’ or ‘‘Dakin’’
‘‘Independent Shareholders’’
‘‘Independent Third Party(ies)’’
‘‘Jilin Nuoshida’’
‘‘Jilin Nuoshida Subscription’’

the director(s) of the Company;

the amended and restated subscription agreement dated July 20, 2021 entered into between the Company and Dalian Yongli;
Hong Kong dollars, the lawful currency of Hong Kong;
the Hong Kong Special Administrative Region of the PRC;
an independent Board committee comprising all independent non-executive Directors, which has been formed to advise the Independent Shareholders on the Dalian Yongli Subscription Agreement (as amended and supplemented by the Supplemental Agreements) and the transactions contemplated thereunder;
Dakin Capital Limited, a licensed corporation licensed to carry on Type 6 (advising on corporate finance) regulated activity under the SFO, and the independent financial adviser to the Independent Board Committee and the Independent Shareholders in respect of (i) the subscription of the Subscription Shares by Dalian Yongli pursuant to the Dalian Yongli Subscription Agreement (as amended and supplemented by the Supplemental Agreements) and the transactions contemplated thereunder;
the Shareholders other than Dalian Yongli and its associates;
person(s) who or company(ies) together with its/their ultimate beneficial owner(s) which, to the best of the Directors’ knowledge, information and belief having made all reasonable enquiries, is/are third party(ies) independent of the Company and its connected person(s) in accordance with the Listing Rules;
吉林諾事達能源投資有限公司 (Jilin Nuoshida Energy Investment Co., Ltd.*), a company incorporated under the laws of PRC with limited liability;
the subscription for the Jixing Nuoshida Subscription Shares by Jilin Nuoshida pursuant to the Jilin Nuoshida Subscription Agreement;

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‘‘Jilin Nuoshida Subscription Agreement’’
‘‘Jilin Nuoshida Subscription Shares’’
‘‘Jixing’’
‘‘Last Financing’’
‘‘Last Trading Day’’
‘‘Latest Practicable Date’’
‘‘Listing Committee’’
‘‘Listing Rules’’
‘‘Meeting’’
‘‘Mr. Liu’’
the subscription agreement dated September 3, 2021 entered into between the Company and Jilin Nuoshida in relation to the subscription of the Jilin Nuoshida Subscription Shares by Jilin Nuoshida;
the 16,000,000 new Common Shares to be allotted and issued to Jilin Nuoshida pursuant to the Jilin Nuoshida Subscription Agreement;
Jixing Gas Holdings Limited, a company incorporated under the laws of the British Virgin Islands;
the private placement offering of the Company where it raised HK$18 million through the offering of 60,000,000 new Common Shares at HK$0.30 per Common Share to Dalian Yongli, the details of which are described in the Company’s announcements dated October 27, 2020, November 30, 2020, December 16, 2020 and December 23, 2020;
June 7, 2021, being the last full trading day for the Common Shares immediately prior to the entering into of the Dalian Yongli Subscription Agreement;
September 13, 2021, being the last practicable date for ascertaining certain information contained in this Circular;
has the meaning ascribed to it under the Listing Rules;
the Rules Governing the Listing of Securities on the Stock Exchange, as amended, supplemented or as otherwise modified from time to time;
the special meeting of the Shareholders to be held on October 17, 2021, or any adjournment thereof, and convened for the Independent Shareholders to, among others, consider and, if thought fit, (i) approve the Dalian Yongli Subscription Agreement (as amended and supplemented by the Supplemental Agreements) and the transactions contemplated thereunder; and (ii) grant the Specific Mandate to the Directors;
Mr. Yongtan Liu, an executive Director and chairman of the Board;

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‘‘Payment Notice’’ an irrevocable notice from Dalian Yongli notifying the Company that it will make payment for the second tranche of 35,000,000 Common Shares in full;

‘‘PRC’’
the People’s Republic of China, which for the purpose of this circular, excludes Hong Kong, the Macau Special Administrative Region and Taiwan;
‘‘Second Amended and Restated the amended and restated subscription agreement dated Dalian Yongli Subscription September 3, 2021 entered into between the Company and Agreement’’ Dalian Yongli;
‘‘SFO’’
the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong);
‘‘Shareholder(s)’’

the holder(s) of the Common Shares;

‘‘Specific Mandate’’
the specific mandate to be sought at the Meeting to allot and issue the Subscription Shares to Dalian Yongli as contemplated under the Dalian Yongli Subscription Agreement (as amended and supplemented by the Supplemental Agreements);
‘‘Stock Exchange’’ The Stock Exchange of Hong Kong Limited;
‘‘Subscription’’ or ‘‘Dalian Yongli Subscription’’
the subscription for the Subscription Shares by Dalian Yongli pursuant to the Dalian Yongli Subscription Agreement (as amended and supplemented by the Supplemental Agreements);
‘‘Subscription Price’’ the subscription price of HK$0.80 per Subscription Share;
‘‘Subscription Shares’’
a total of 55,000,000 new Common Shares to be allotted and issued by the Company to Dalian Yongli pursuant to the terms and conditions of the Dalian Yongli Subscription Agreement (as amended and supplemented by the Supplemental Agreements);
‘‘substantial shareholder(s)’’ has the meaning ascribed to it under the Listing Rules;
‘‘Supplemental Agreements’’
collectively the First Amended and Restated Dalian Yongli Subscription Agreement and the Second Amended and Restated Dalian Yongli Subscription Agreement;

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‘‘Trading Day(s)’’

the day(s) on which the Stock Exchange is open for trading and the Common Shares are freely available for trading; and

‘‘%’’ per cent.

For the purpose of illustration only and unless otherwise specified, conversion of C$ to HK$ in this circular is based on the exchange rate of C$1.00 to HK$0.16. Such conversion should not be construed as a representation that any amount has been, could have been, or may be exchanged at this or any other rate.

Certain figures set out in this Circular have been subject to rounding adjustments. Accordingly, figures shown as the percentage equivalents may not be an arithmetic sum of such figures. Any discrepancy in any table between totals and sums of amounts listed in this Circular is due to rounding.

For identification purpose only.

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Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong Limited take no responsibility for the contents of this document, make no representation as to its accuracy or completeness and expressly disclaim any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this document.

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PERSTA RESOURCES INC.

(incorporated under the laws of Alberta with limited liability)

Suite 3600, 888-3rd Street SW, Calgary, Alberta T2P 5C5, Canada

Telephone: 1-403-355-6623 Fax: 1-403-440-1206

(HK stock code: 3395)

MANAGEMENT INFORMATION CIRCULAR AND PROXY STATEMENT

GENERAL PROXY MATTERS

Solicitation of Proxies by Management

This management information circular (the ‘‘Circular’’) is furnished in connection with the solicitation of proxies by the management of the Company for use at the Meeting to be held at Suite 3600, 888-3rd Street SW, Calgary, Alberta T2P 5C5, Canada, on October 15, 2021, at 9:00 a.m. (Calgary time)/11:00 p.m. (Hong Kong time), and any adjournment thereof. This Circular contains information as at the Latest Practicable Date unless otherwise noted. All references to ‘‘$’’ in this Circular refer to the lawful currency of Canada, unless otherwise noted.

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if the transferee cannot demonstrate to the Company with sufficient certainty that the relevant Common Shares have not already been voted by proxy or will be voted by the relevant transferor at the Meeting.

Registered Shareholders are invited to attend the Meeting and vote their Common Shares at the Meeting. Shareholders can also appoint a proxy holder (who need not be a Shareholder) to attend and vote at the Meeting on the Shareholder’s behalf and to convey a Shareholder’s voting instructions. Solicitations of proxies will be primarily by mail, but some proxies may be solicited personally or by telephone, facsimile transmission or other electronic means by our officers, directors or employees at a nominal cost. The cost of solicitation will be borne by the Company.

Registered Shareholders who receive this Circular and other accompanying Meeting materials from the Company’s branch share registrar in Hong Kong, being Computershare Hong Kong Investor Services Limited, and who are unable to be present at the Meeting are requested to date and sign the enclosed form of proxy and return it to Computershare Hong Kong Investor Services Limited at 17M Floor, Hopewell Centre, 183 Queen’s Road East, Wan Chai, Hong Kong, in the enclosed envelope provided for that purpose, so that it is received during regular business hours no later than 48 hours (excluding Saturdays, Sundays and holidays in Hong Kong) prior to the time of the Meeting, or any adjournment thereof. If a Shareholder is registered as a member of the Company on the register of members in Hong Kong on the Record Date, such Shareholder’s records are currently maintained on the Hong Kong register and such Shareholder’s proxy should be deposited in accordance with the instructions set out in this paragraph.

Registered Shareholders who receive this Circular and other accompanying Meeting materials from the Company’s principal share registrar in Canada, being Computershare Trust Company of Canada, and who are unable to be present at the Meeting, are requested to date and sign the enclosed form of proxy and return it to Computershare Trust Company of Canada, Proxy Department, 100 University Avenue, 8th Floor, Toronto, Ontario M5J 2Y1, Canada, in the enclosed envelope provided for that purpose, so that it is received no later than 48 hours (excluding Saturdays, Sundays and holidays in Canada) prior to the time of the Meeting or any adjournment thereof. Registered shareholders may submit their voting instructions online at www.investorvote.com or by phone at 1-866-732-VOTE (8683) (toll free within North America) or 1-312-588-4290 (outside North America). Shareholders are cautioned that the use of mail to transmit proxies is at each Shareholder’s risk. If a Shareholder acquired its Common Shares prior to the Record Date and is registered as a Shareholder on the register of Shareholders in Canada on the Record Date, such Shareholder’s records are currently maintained on the Canadian register and such Shareholder’s proxy should be deposited in accordance with the instructions set out in this paragraph.

The individuals named in the enclosed form of proxy are officers of the Company (the ‘‘Management Designees’’). A Shareholder wishing to appoint some other person (who need not be a shareholder of the Company) to represent him or her at the Meeting has the right to do so, either by inserting that person’s name in the blank space provided in the form of proxy and striking out the names of the Management Designees, or by completing another form of proxy, or by using the internet at www.investorvote.com or the telephone by calling 1-866-7328683 (toll free within North America) or 1-312-588-4290 (outside North America).

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If you vote your proxy using the internet or the telephone, do not send back the form of proxy.

Completion and return of the form of proxy will not preclude Shareholders from attending and voting in person at the Meeting or any adjournment thereof if they so wish.

Advice to Beneficial Holders of Common Shares

The information set forth in this section is of significant importance to you if you do not hold your Common Shares in your own name. Only proxies deposited by Shareholders whose names appear on our records as the registered holders of Common Shares can be recognized and acted upon at the meeting. If Common Shares are listed in your account statement provided by your broker, then in almost all cases those Common Shares will not be registered in your name on our records. Such Common Shares will likely be registered under the name of your broker or an agent of that broker.

Only registered holders of Common Shares or the persons they validly appoint as their proxies are permitted to vote at the Meeting. However, in many cases, Common Shares beneficially owned by a person (a ‘‘Non-Registered Holder’’) are registered either: (i) in the name of an intermediary (an ‘‘Intermediary’’) (including banks, trust companies, securities dealers or brokers and trustees or administrators of self-administered RRSPs, RRIFs, RESPs and similar plans) that the NonRegistered Holder deals with in respect of the shares; or (ii) in the name of a clearing agency (such as the Canadian Depository for Securities Limited) of which the Intermediary is a participant.

If you do not hold your Common Shares in your own name, you may give permission to your broker or other intermediary to release your name and address to us so that we can send proxy related materials to you directly. Alternatively, you may instruct your broker or other intermediary who holds your Common Shares to not provide your name and address to us, in which case, your broker or other intermediary is required to send such materials to you. We currently do not provide proxy related materials directly to beneficial Shareholders and we assume the costs associated with the delivery of meeting materials to beneficial Shareholders.

Applicable regulatory policy requires your broker to seek voting instructions from you in advance of the Meeting. Every broker has its own mailing procedures and provides its own return instructions, which you should carefully follow in order to ensure that your Common Shares are voted at the Meeting. Often, the form of proxy supplied by your broker is identical to the form of proxy provided to registered Shareholders. However, its purpose is limited to instructing the registered Shareholder how to vote on your behalf.

In Canada, most brokers now delegate responsibility for obtaining instructions from clients to Broadridge Financial Solutions Inc. (‘‘Broadridge’’). Broadridge mails a voting instruction form in lieu of a proxy provided by the Company. The voting instruction form will name the same persons as the Company’s proxy to represent you at the Meeting. You have the right to appoint a person (who need not be a Beneficial Shareholder of the Company), other than the persons designated in the voting instruction form, to represent you at the Meeting. To exercise this right, you should insert the name of the desired representative in the blank space provided in the voting instruction form. The completed voting instruction form must then be returned to Broadridge by mail or facsimile or given to Broadridge by phone or over the internet, in accordance with Broadridge’s

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instructions. Broadridge then tabulates the results of all instructions received and provides appropriate instructions respecting the voting of Common Shares to be represented at the Meeting. If you receive a voting instruction form from Broadridge, you cannot use it to vote Common Shares directly at the Meeting. The voting instruction form must be completed and returned to Broadridge, in accordance with its instructions, well in advance of the Meeting in order to have the Common Shares voted.

Although you may not be recognized directly at the Meeting for the purposes of voting Common Shares registered in the name of your broker, you may attend the Meeting as a proxyholder for the registered Shareholder and vote your Common Shares in that capacity. If you wish to attend the Meeting and vote your own Common Shares, you must do so as proxyholder for the registered Shareholder. To do this, you should enter your own name in the blank space on the applicable form of proxy provided to you and return the document to your broker or the agent of such broker in accordance with the instructions provided by such broker well in advance of the Meeting.

The Canadian Securities Administrators have adopted a ‘‘notice-and-access’’ regime for shareholder meetings that permits issuers to send a reduced package of meeting materials to shareholders, together with the document required to cast their vote. We have elected not to use the ‘‘notice-andaccess’’ regime for the Meeting and paper copies of such materials will be sent to all of our Shareholders.

Revocation of Proxy

A Shareholder who has submitted a proxy may revoke it at any time prior to the exercise thereof. In addition to revocation in any other manner permitted by law, a Shareholder who has given a proxy may revoke it by:

(a) executing a proxy bearing a later date or by executing a valid notice of revocation, either of the foregoing to be executed by the Shareholder or by such person’s authorized attorney in writing or, if such person is a corporation, under its corporate seal by an officer or attorney duly authorized, and by delivering the proxy bearing a later date to the Company’s principal share register in Canada, being Computershare Trust Company of Canada at Proxy Department, 100 University Avenue, 8th Floor, Toronto, Ontario M5J 2Y1, Canada, in the enclosed envelope provided for that purpose, so that it is received no later than 48 hours (excluding Saturdays, Sundays or holidays in Canada) prior to the time of the Meeting or any adjournment thereof. Registered shareholders may also use the internet site at www.investorvote.com to transmit their voting instructions or vote by phone at 1-866-732VOTE (8683) (toll free within North America) or 1-312-588-4290 (outside North America), or the Company’s branch share registrar in Hong Kong, being Computershare Hong Kong Investor Services Limited at 17M Floor, Hopewell Centre, 183 Queen’s Road East, Wan Chai, Hong Kong, as applicable, at least 48 hours (excluding Saturdays, Sundays or holidays in Hong Kong) prior to the time of the Meeting or any adjournment thereof, at which the proxy is to be used, or to the chairman of the Meeting on the day of the Meeting or any reconvening thereof, or in any other manner provided by law; or
(b) personally attending the Meeting and voting such person’s Common Shares at the Meeting.

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A revocation of a proxy will not affect a matter on which a vote is taken before the revocation.

Persons Making the Solicitation

This solicitation is made on behalf of the Company’s management. We will bear the costs incurred in the preparation and mailing of the form of proxy, notice of annual general and special meeting, and this Circular. In addition to mailing forms of proxy, proxies may be solicited by personal interviews, or by other means of communication, by our directors, officers or employees who will not be remunerated therefor.

Exercise of Discretion by Proxyholders

The Common Shares represented by proxy in favor of management nominees will be voted on any poll taken at the Meeting. Where you specify a choice with respect to any matter to be acted upon, the Common Shares will be voted or withheld from voting on any poll in accordance with the specification so made. If you do not provide instructions, your Common Shares will be voted in favor of the matters to be acted upon as set out herein. The persons appointed under the form of proxy which we have furnished are conferred with discretionary authority with respect to amendments or variations of those matters specified in the form of proxy and notice of annual general and special meeting and with respect to any other matters which may properly be brought before the Meeting or any adjournment thereof. At the time of printing this Circular, we know of no such amendment, variation or other matter.

Voting by Poll

Pursuant to Rule 13.39(4) of the Listing Rules, any vote of shareholders at a general meeting must be taken by poll except where the chairman, in good faith, decides to allow a resolution which relates purely to a procedural or administrative matter to be voted on by a show of hands. The Company will announce the results of the poll in the manner prescribed in Rule 13.39(5) of the Listing Rules.

Counting the Votes

The Company’s principal share registrar, Computershare Trust Company of Canada, and the Company’s branch share registrar, Computershare Hong Kong Investor Services Limited, will count and tabulate the proxies for Common Shares. This is done independently of the Company to preserve confidentiality in the voting process. Proxies are referred to the Company only in cases where a Shareholder clearly intends to communicate with management or when it is necessary to do so to meet the requirements of applicable law.

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VOTING SECURITIES AND PRINCIPAL HOLDERS OF VOTING SECURITIES

Voting Securities

The Company’s authorized share structure consists of an unlimited number of Common Shares without par value and an unlimited number of preferred shares. As at the Record Date, the Company had 361,886,520 fully paid and non-assessable Common Shares and no preferred shares outstanding. Each Common Share carries the right to one vote at meetings of Shareholders.

Quorum

By-Law Number Two of the Company provides that if at least two persons present as registered Shareholders or as proxyholders for registered Shareholders, together of which is entitled to vote at such meeting, holding or representing in the aggregate not less than five per cent of the total number of Common Shares carrying the right to vote at such meeting, a quorum for the purposes of conducting a shareholders’ meeting is constituted.

Principal Holders

To the knowledge of the Directors and executive officers of the Company, as at the Record Date, the only persons who beneficially own, control or direct, directly or indirectly, Common Shares carrying 10% or more of the votes attached to the Common Shares entitled to be voted at the Meeting are as follows:

		% of Common Shares
Name of Shareholder	Number of Common Shares	% of Common Shares
Aspen Investment Holdings Ltd.(1)	181,194,306	50.07%
Dalian Yongli Petrochemicals Ltd.	60,000,000	16.58%
HKSCC Nominees Limited(2)	265,535,894(3)	73.4%

Notes:

(1) Aspen Investment Holdings Ltd. (‘‘Aspen’’) holds 181,194,306 Common Shares and is a corporation controlled by Mr. Yuan Jing and Mr. Le Bo, two of Persta’s former directors, who indirectly hold 41.09% and 39.69% of Aspen respectively.
(2) HKSCC Nominees Limited is a subsidiary of the HKEX and its principal business is to act on behalf of other corporate or individual shareholders. All shares of Hong Kong listed companies, which are deposited into HKEX’s Central Clearing and Settlement System, are registered in the name of HKSCC Nominees Limited.
(3) Includes Common Shares held by Aspen, which have been transferred from the Canadian share register to the Hong Kong share register and have been deposited in HKEX’s Central Clearing and Settlement System.

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INTEREST OF CERTAIN PERSONS OR COMPANIES IN MATTERS TO BE ACTED UPON

Other than as disclosed below or elsewhere in this Circular, none of the Directors or executive officers of the Company, no proposed nominee for election as a director of the Company, none of the persons who have been Directors or executive officers of the Company since the commencement of the Company’s last completed financial year and no associate or affiliate of any of the foregoing persons has any material interest, direct or indirect, by way of beneficial ownership of securities or otherwise, in any matter to be acted upon at the Meeting.

As at the Latest Practicable Date, Dalian Yongli held 60,000,000 Common Shares, representing approximately 16.58% of the issued and outstanding Common Shares. Dalian Yongli and its associates shall abstain from voting on the relevant resolution(s) to approve the Dalian Yongli Subscription Agreement (as amended and supplemented by the Supplemental Agreements) and the transactions contemplated thereunder at the Meeting.

Other than the aforesaid Shareholders, to the best knowledge, belief and information of the Directors, having made all reasonable enquiries, no Shareholder is required under the Listing Rules to abstain from voting on the resolutions at the Meeting.

SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS

As at the date of this Circular, no Common Shares have been reserved for issuance under any equity compensation plans of the Company.

INTEREST OF INFORMED PERSONS IN MATERIAL TRANSACTIONS

For the purposes of this Circular, ‘‘informed person’’ means:

(i) a director or executive officer of the Company;
(ii) a director or executive officer of a person or company that is itself an informed person or subsidiary of the Company;
(iii) any person or company who beneficially owns, directly or indirectly, voting securities of the Company or who exercises control or direction over voting securities of the Company, or a combination of both, carrying more than 10% of the voting rights attached to all outstanding voting securities of the Company, other than voting securities held by the person or company as underwriter in the course of a distribution; and
(iv) the Company if it has purchased, redeemed or otherwise acquired any of its own securities, for so long as it holds any of its securities.

Other than as disclosed herein, none of the Directors or executive officers of the Company, nor any person who beneficially owns directly or indirectly or exercises control or direction over securities carrying more than 10% of the voting rights attaching to the shares in the capital of the Company, nor any known associate or affiliate of these persons, had any material interest, direct or indirect in

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any transaction within the three years before the date hereof which has materially affected the Company, or in any proposed transaction which has materially affected or would materially affect the Company.

BACKGROUND TO THE SUBSCRIPTION

The principal terms of the Dalian Yongli Subscription Agreement (as amended and restated by the Supplemental Agreements) are set out below.

Date of the Dalian Yongli Subscription Agreement

June 8, 2021 (after trading hours)

Date of the First Amended and Restated Dalian Yongli Subscription Agreement

July 20, 2021 (after trading hours)

Date of the Second Amended and Restated Dalian Yongli Subscription Agreement

September 3, 2021 (after trading hours)

Parties

The Company and Dalian Yongli

Dalian Yongli, which holds 60,000,000 Common Shares representing approximately 16.58% of the issued and outstanding Common Shares as at the Latest Practicable Date, is a company incorporated under the laws of the PRC with limited liability and is wholly-owned by Mr. Zhang Zhong (張鐘). Dalian Yongli is principally engaged in the sales and trading of petroleum and natural gas products. Other than being a substantial shareholder of the Company, to the best knowledge, information and belief of the Board and after making all reasonable enquiries, Dalian Yongli and its ultimate beneficial owner are third parties independent of and not connected with the Company and its connected persons.

Subscription Shares

Pursuant to the Dalian Yongli Subscription Agreement (as amended and restated by the Supplemental Agreements), the Company has conditionally agreed to allot and issue, and Dalian Yongli has conditionally agreed to subscribe for, 20,000,000 Common Shares at the Subscription Price of HK$0.80 per Common Share and 35,000,000 Common Shares at the higher of (i) HK$0.80, and (ii) the volume weighted average price per Common Share as quoted on the Stock Exchange for the 30 Trading Days immediately preceding the date on which the Company receives the Payment Notice from Dalian Yongli.

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The Subscription Shares represent (i) approximately 15.20% of the issued and outstanding Common Shares as at the Latest Practicable Date; and (ii) approximately 13.19% of the total number of issued and outstanding Common Shares as enlarged by the allotment and issue of the Subscription Shares (subject to Completion of the Subscription and assuming that no Common Shares will be issued between the Latest Practicable Date and the Completion of the Subscription).

SUBSCRIPTION PRICE

The Subscription Price of HK$0.80 per Subscription Share represents:

(1) a premium of approximately 119% to the closing price of HK$0.365 per Common Share as quoted on the Stock Exchange on the Last Trading Day;
(2) a premium of approximately 122% to the average closing price of HK$0.361 per Common Share as for the last 5 consecutive trading days up to and including the Last Trading Day;
(3) a premium of approximately 123% to the average closing price of HK$0.358 per Common Share as for the last 10 consecutive trading days up to and including the Last Trading Day;
(4) a premium of approximately 100% to the average closing price of HK$0.399 per Common Share as for the last 30 consecutive trading days up to and including the Last Trading Day;
(5) a premium of approximately 96% to the average closing price of HK$0.408 per Common Share as for the last 45 consecutive trading days up to and including the Last Trading Day;
(6) a premium of approximately 19% to the average closing price of HK$0.67 per Common Share as at February 18, 2021, the last trading day when the total trade volume exceeded one million Common Shares;
(7) a premium of approximately 3% to the trading price of HK$0.78 per Common Share as at February 18, 2021, the last trading day when the total trade volume exceeded one million Common Shares and the highest trading price of the Common Shares over the past 52 weeks; and
(8) a premium of approximately 36% to the closing price of HK$0.59 per Common Share as at the Latest Practicable Date.

The Subscription Price was determined after arm’s length negotiations between the Company and Dalian Yongli after considering, among other things, the Company’s past performance and future prospects and in particular, the market performance and liquidity of the Common Shares.

Year-to-date from January 1, 2021 to June 7, 2021 (the Last Trading Day in respect of the Dalian Yongli Subscription Agreement), the Stock Exchange has been opened for trading for a total of 105 days. Over this period, a total of 8.33 million Common Shares were traded on 42 days and no trades were executed on 63 days. This low level of liquidity is reflected in the 18% Bid-Ask Spread on June 7, 2021 (bid price of HK$0.390 per Common Share, ask price of HK$0.325 per Common Share, and HK$0.365 per Common Share on June 7, 2021).

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Year-to-date from January 1, 2021 to June 7, 2021, the total daily trading volume of the Company’s Common Shares exceeded one million Common Shares only one day on February 18, 2021, when 3.85 million Common Shares were traded. The increase in volume was further reflected in the price of the Common Shares, which increased from HK$0.28 at market open to HK$0.78, and HK$0.67 at market closing on the same day, an increase of 139% from the previous day’s closing price. Subsequent to February 18, 2021 and up to June 7, 2021, daily trading volumes averaged approximately 35,000 Common Shares per day, and the market price of the Common Shares declined on lower trading volumes to June 7, 2021, establishing a positive correlation between prevailing trading volume and price, where the market price of the Common Shares increased as the volume increased (please refer to ‘‘YEAR-TO-DATE COMMON SHARE TRADING DATA’’ of this Circular for additional information).

The Company and Dalian Yongli acknowledged that the conditional placing of 55 million Common Shares would significantly exceed the number of Common Shares traded in the prevailing market, and determined that the Subscription Price should incorporate the positive correlation between the prevailing trading volume and the Common Share price.

Ranking of the Subscription Shares

The Subscription Shares, when issued and fully paid, will rank pari passu in all respects among themselves and with all the Common Shares in issue at the time of allotment and issue of the Subscription Shares.

Conditions of the Subscription

Pursuant to the Dalian Yongli Subscription Agreement (as amended and restated by the Supplemental Agreements), Completion of the Subscription is conditional upon satisfaction of the following conditions: (1) the passing of the resolutions of the Board approving the allotment and issue of the Subscription Shares under the Dalian Yongli Subscription Agreement (as amended and restated by the Supplemental Agreements);

(2) the passing by the Independent Shareholders at the Meeting of resolutions approving the Dalian Yongli Subscription Agreement (as amended and restated by the Supplemental Agreements) and the grant of the Specific Mandate for the allotment and issue of the Subscription Shares;
(3) the Company having obtained all necessary approvals and consents (if any) in relation to the Subscription and the transactions contemplated thereunder;
(4) the Listing Committee granting the listing of, and permission to deal in, the Subscription Shares (and such approval not subsequently revoked prior to the date of Completion); and
(5) delivery by Dalian Yongli to the Company of evidence satisfactory to the Company, in its sole discretion, that Dalian Yongli has sufficient funds available to subscribe the Subscription Shares.

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Pursuant to the Dalian Yongli Subscription Agreement (as amended and restated by the Supplemental Agreements), in the event that any of the above conditions under the Dalian Yongli Subscription Agreement (as amended and restated by the Supplemental Agreements) has not been fulfilled on or before August 31, 2021 (or such other date as may be determined by the Company in its sole discretion), the Dalian Yongli Subscription Agreement (as amended and restated by the Supplemental Agreements) shall terminate with immediate effect pursuant to its terms, and the parties thereto shall be released and discharged from their respective obligations under the Dalian Yongli Subscription Agreement (as amended and restated by the Supplemental Agreements) (except for their accrued right or obligation at the date of termination and the respective surviving clauses).

As additional time is required for Completion, the Company has decided to extend the completion date of the aforementioned conditions to October 15, 2021.

As at the date of this Circular, none of the conditions set forth above has been fulfilled.

Completion of the Subscription

Subject to fulfillment of the conditions of the Dalian Yongli Subscription Agreement (as amended and restated by the Supplemental Agreements), Completion of the Subscription will be in two tranches as follows:

(1) the first tranche of 20,000,000 Common Shares will be allotted and issued to Dalian Yongli on the date upon which all of the conditions of the Dalian Yongli Subscription Agreement (as amended and restated by the Supplemental Agreements) have been satisfied or, where applicable, waived; and
(2) the second tranche of 35,000,000 Common Shares will be allotted and issued to Dalian Yongli within one day after the Company receives the Payment Notice from Dalian Yongli, provided that it shall be a date on or before October 15, 2021.

The subscription tranche arrangement guarantees a minimum price of HK$0.80 per Common Share if the volume weighted average price per Common Share as quoted on the Stock Exchange for the 30 Trading Days immediately preceding the date on which the Company receives the Payment Notice from Dalian Yongli is at or below HK$0.80 per Common Share. As the Board was notified by Dalian Yongli prior to the signing of the First Amended and Restated Dalian Yongli Subscription Agreement that Dalian Yongli would need additional time to arrange for the payment of the amended subscription proceeds in full and since the Company was in imminent need of capital to reduce its debt level, the Company and Dalian Yongli agreed to incorporate the Subscription in two tranches arrangement to ensure Dalian Yongli could pay for the amended subscription proceeds in full. Considering (i) the arrangement guarantees a minimum subscription price of HK$0.80 per Common Share, (ii) the daily trading volume and closing price per Common Share traded in the open market for the period beginning January 1, 2021 and up to the Latest Practicable Date, and (iii) the need to raise additional capital to sustain the Company’s continuing operations during these difficult times, the Directors considered that this arrangement is fair and reasonable and is in the interest of the Company and the Shareholders as a whole.

– 18 –

If Dalian Yongli fails to deliver the Payment Notice to the Company on or before October 15, 2021, the Dalian Yongli Subscription Agreement (as amended and supplemented by the Supplemental Agreements) shall automatically terminate with immediate effect pursuant to their terms and the parties thereto shall be released from all liabilities and obligations under the Dalian Yongli Subscription Agreement (as amended and supplemented by the Supplemental Agreements) (except for their accrued right or obligations at the date of termination and the respective surviving clauses).

Dalian Yongli shall pay to the Company the Subscription Price corresponding to each tranche of Subscription Shares allotted and issued at each completion in immediately available funds by wire transfer. The Company will not allot and issue any Common Shares to Dalian Yongli until payment by Dalian Yongli, and the receipt by the Company of, the Subscription Price corresponding to each tranche of Subscription Shares in full.

YEAR-TO-DATE COMMON SHARE TRADING DATA

The following graph summarizes the daily trading volume and closing price per Common Share for the period beginning January 1, 2021 and up to the Latest Practicable Date:

Year-to-date daily trading volume and closing price per Common Share

==> picture [432 x 231] intentionally omitted <==

----- Start of picture text -----

$0.80 4,500,000
$0.70 4,000,000
3,500,000
$0.60
3,000,000
$0.50
2,500,000
$0.40
2,000,000
$0.30
1,500,000
$0.20
1,000,000
$0.10
500,000
$0.00 –
Trading Volume Closing Price per Common Share Subscription Price
2021/01042021/01/182021/02/012021/02/172021/03/032021/03/172021/03/312021/04/192021/05/032021/05/172021/06/012021/06/162021/06/302021/07/152021/07/29
HK$
Shares traded
----- End of picture text -----

Source: Website of the Stock Exchange

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This graph illustrates the positive correlation between prevailing trading volume and price, where the market price of the Common Shares increased as the trading volume increased. The Company and Dalian Yongli acknowledged that the conditional placing of 55 million Common Shares would significantly exceed the number of Common Shares traded in the prevailing market, and determined that the Subscription Price should incorporate the positive correlation between the prevailing trading volume and the Common Share price.

APPLICATION FOR LISTING

The Company will apply to the Listing Committee for the listing of, and permission to deal in, the Subscription Shares on the Main Board of the Stock Exchange.

INFORMATION CONCERNING THE COMPANY

The Company is principally engaged in natural gas and crude oil exploration and production, with a focus on natural gas resources. The Company focuses on long-term growth through acquisition, exploration, development and production in the Western Canadian Sedimentary Basin of its significant holdings of natural gas leases in the Western Canadian Sedimentary Basin region.

REASONS FOR ENTERING INTO THE SUBSCRIPTION AGREEMENTS AND USE OF PROCEEDS

Use of proceeds

Assuming the Subscription Price per Common Share of the second tranche of 35,000,000 Common Shares to be allotted and issued to Dalian Yongli will be HK$0.80, the gross proceeds and net proceeds from the subscription of new Common Shares by Dalian Yongli are expected to be HK$44 million (C$7.04 million) and HK$42.5 million (C$6.8 million), respectively. The Company intends to apply the net proceeds of the subscription for new Common Shares by Dalian Yongli, after the deduction of the estimated related expenses to be incurred in the Subscription, as follows:

(1) approximately 35% of the net proceeds for financing the drilling of new wells at the Basing area;
(2) approximately 45% of the net proceeds for partial repayment of the Company’s subordinated debt; and
(3) approximately 20% of the net proceeds for additional working capital of the Company and other general corporate purposes.

As detailed below, the Company must make a payment of C$2.2 million in respect of its subordinated debt facility on or before September 30, 2021, and an additional payment of C$2.2 million in respect of the same debt facility on or before October 15, 2021. The Company will apply the C$2.048 million proceeds from the Jilin Nuoshida Subscription to partially satisfy the C$2.2 million debt payment due September 30, 2021. The Company will apply the C$6.8 million proceeds from the Subscription to satisfy in full (1) any amount not yet fully repaid under the debt payment due September 30, 2021 (which amount to C$0.152 million); and (2) the debt payment due October 15, 2021 of C$2.2 million. Excess proceeds of C$4.448 million (assuming the Subscription Price of

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the second tranche the Subscription Shares will be HK$0.80 per Common Share) will be directed towards the funding of new drilling at the Company’s Basing area which the Company intends to undertake in October 2021, and working capital as required following receipt of the subscription proceeds.

Reasons for entering into the Dalian Yongli Subscription Agreement

The Company is principally engaged in natural gas and crude oil exploration and production, with a focus on natural gas. The Company focuses on long-term growth through acquisition, exploration, development and production in the Western Canadian Sedimentary Basin.

The global impact of the outbreak of COVID-19 has resulted in significant volatility in global stock markets and oil and natural gas prices over the past year, which has impacted the Company’s revenues. This volatility is expected to continue while restrictions on local and international travel remain in place, which could negatively impact the Company’s future revenues should prices decline. On June 30, 2021 the Company and its lender agreed to restructure its subordinated debt (the ‘‘2021 Restructuring’’). Pursuant to the 2021 Restructuring, the Company must secure additional capital in the form of new equity for a cumulative amount equal to or greater than C$8 million on or before October 15, 2021, make a C$2.2 million principal payment on or before September 30, 2021, and make a C$2.2 million principal payment on or before October 15, 2021. The Subscription would decrease the interest expenses of the Company given that pursuant to the 2021 Restructuring, the PIK Interest (as defined in the Company’s audited financial statements for the year ended December 31, 2020) and Penalty Interest (as defined in the Company’s audited financial statements for the year ended December 31, 2020) payments will terminate when the loan balance is below C$20 million, and the loan interest rate will reduce to 10% when the loan balance is below C$15 million (please refer to Note 13 of the Company’s audited financial statements for the year ended December 31, 2020 for additional details in respect of the 2021 Restructuring). Due to the volatile commodity price environment and obligations associated with the 2021 Restructuring, the Company is in need of additional capital.

The Company has considered alternative financing options and engaged in discussions with potential investors and underwriters in Canada, the United States of America and the PRC. In the course of these discussions, the Company explored and considered the feasibility of alternative financing options prior to agreeing to enter into the Subscription Agreements. Options considered by the Company included equity financings, open offer and pre-emptive share issuances and debt financings. Given the price performance of the Common Shares and uncertainty in the global capital markets, the Company was unable to engage an underwriter to arrange new equity, open offer, rights issue or bond offerings.

Both an open offer or rights issue would allow the Shareholders to participate in the subscription of new Common Shares to be issued by the Company, and would allow Shareholders to maintain their respective pro rata shareholdings in the Company. Given that both an open offer and rights issue would require approval from the relevant authorities and would involve, among other things, the preparation and filing of a prospectus, and the printing and handling of application forms, the Company considered that the relatively small size of the financing required did not warrant an open offer or a rights issue, as it would incur additional time and significant costs. Additionally, the

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Company was unable to find an underwriter willing to underwrite any Common Shares not subscribed for, without providing a discount on the price of such Common Shares which would not be in the best interests of the Company and the Shareholders as a whole.

In relation to debt financing, further borrowings would create additional interest burden for the Company and the due diligence and negotiation process with the relevant banks may be lengthy, and debt financing would also increase the debt-to-equity ratio of the Company.

While the Company has considered placing the Subscription Shares to Independent Third Parties, given that Dalian Yongli is engaged in the non-storage operations of natural gas, gasoline, diesel, tar, kerosene, 1,2-xylene, methyl butyl ether, coal tar and methanol which the Company considers strategic to its existing business operations, the Directors consider that the Subscription (i) will open up potential collaboration opportunities between the Company and Dalian Yongli as the Directors believe that Dalian Yongli will have a stronger interest (from the perspective of preserving and/or enhancing Dalian Yongli’s investment in the Company) following the completion of the Subscription; and (ii) represents a valuable opportunity for Dalian Yongli to increase its interest in the Company which reflects the confidence of Dalian Yongli in the long-term prospects of the Company. Therefore, the Directors are of the view that placing with Dalian Yongli would reinforce the Company’s strategic alliance with Dalian Yongli and provide an efficient means of raising capital for the Company’s present needs on terms which are favorable to the Company. Accordingly, the Company has entered into the Dalian Yongli Subscription Agreement with Dalian Yongli to provide the Company with further capital.

The Company and Dalian Yongli have agreed that Dalian Yongli will pay for the Subscription in C$ using the exchange rate of the higher of (i) HK$0.16 to C$1, and (ii) the HK$ to C$ exchange rate as quoted by the Bank of Canada for the five days preceding the payment for the new Common Shares. Given that the Company is a Canadian company and incurs costs in C$, to eliminate foreign exchange risk which the Company and the Shareholders otherwise would be exposed to if the HK$ to C$ exchange rate was not fixed, the Company and Dalian Yongli agreed to fix the HK$ to C$ exchange rate to the average rate at the average HK$ to C$ foreign exchange rates from February 18, 2021 until the date of Subscription rounded to the nearest decimal point (February 18, 2021 being the last Trading Day when the total trade volume exceeded one million Common Shares and the highest trading price of the Common Shares over the past 52 weeks).

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Contemplated transactions

As at the Latest Practicable Date, other than the entering into of the Dalian Yongli Subscription Agreement (as amended and supplemented by the Supplemental Agreements), the Company has not entered into, or contemplated entering into, any other arrangements, agreements or understandings (whether formal or informal and whether express or implied) with Dalian Yongli. However, the Company periodically engages in considering acquisition or disposal activities. The Company will review its business plan from time to time and may consider potential business expansion and investment opportunities. Should such opportunities arise in the future, the Company will make the relevant announcement in accordance with the Listing Rules if and when applicable.

FUNDRAISING ACTIVITIES OF THE COMPANY IN THE PAST TWELVE MONTHS

Save for the fundraising activity mentioned below, the Company has not conducted any equity fund raising activities in the past twelve months immediately preceding the Latest Practicable Date.

Date of announcement October 27, 2020, November 30, 2020, December 16, 2020 and December 23, 2020 (Hong Kong time). September 3, 2021	Event Issue of new Common Shares under general mandate. Issue of new Common Shares under general mandate.	Net proceeds The gross proceeds from the issuance of the new Common Shares amounted to HK$18 million. The gross proceeds and net proceeds from the issuance of the new Common Shares amounted to HK$12.8 million and HK$12.5 million, respectively.	Intended use of proceeds The net proceeds from the issue of the new Common Shares was intended to be applied towards the expansion of the Company’s existing business and as general working capital of the Company. The net proceeds from the issue of the new Common Shares was intended to be applied in full to fulfil the September 15, 2021 principal payment of approximately C$2.05 million.	Actual use of proceeds as at the date of this Circular
				Approximately HK$6 million used for facility optimization and production de- bottlenecking to enhance natural gas production from the Company’s Basing area. Approximately HK$12 million applied towards the Company’s working capital deficit. —

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IMPLICATIONS OF THE LISTING RULES

As at the Latest Practicable Date, Dalian Yongli held 60,000,000 Common Shares, representing approximately 16.58% of the issued and outstanding Common Shares. As Dalian Yongli is a substantial shareholder, the entry into of the Dalian Yongli Subscription Agreement (as amended and supplemented by the Supplemental Agreements) and the transactions contemplated thereunder (including the Subscription and the issue of the Subscription Shares under the Specific Mandate) constitute connected transactions of the Company under Chapter 14A of the Listing Rules and are subject to reporting, announcement and Independent Shareholders’ approval requirements under Chapter 14A of the Listing Rules.

As at the Latest Practicable Date, 92,254,507 Common Shares are held by the public (within the meanings of the Listing Rules), representing approximately 25.49% of the issued and outstanding Common Shares. Immediately upon completion of (1) the Subscription (first tranche of 20,000,000 Common Shares), approximately 24.16% of the issued share capital of Company will be held by the public; and (2) the Subscription (second tranche of 35,000,000 Common Shares), approximately 22.13% of the issued share capital of the Company will be held by the public.

Accordingly, as a result of the issuance of new Common Shares pursuant to the Subscription, the percentage of total issued and outstanding Common Shares held by the public will fall below 25%, which is the minimum public float threshold required under Rule 8.08(1)(a) of the Listing Rules.

On September 3, 2021 (after trading hours), the Company entered into the Jilin Nuoshida Subscription Agreement with Jilin Nuoshida, pursuant to which the Company has conditionally agreed to allot and issue, and Jilin Nuoshida has conditionally agreed to subscribe for, 16,000,000 Common Shares, representing approximately 4.42% of the issued share capital of the Company as at the date of this Circular, at the subscription price of HK$0.80 per Common Share. Completion of the Jilin Nuoshida Subscription is subject to the satisfaction of the conditions precedent to the Jilin Nuoshida Subscription Agreement on or before September 30, 2021, or such other date as may be determined by the Company in its sole discretion. The 16,000,000 Common Shares to be subscribed by Jilin Nuoshida will be counted towards the public float under the Listing Rules.

Immediately upon completion of the Jilin Nuoshida Subscription and prior to the issuance of any new Common Shares to Dalian Yongli, a total of 108,254,507 Common Shares will be held by the public, representing approximately 28.65% of the issued share capital of the Company as enlarged by the Jilin Nuoshida Subscription. Immediately upon completion of the Jilin Nuoshida Subscription and the Dalian Yongli Subscription, a total of 108,254,507 Common Shares will be held by the public, representing approximately 25.01% of the issued share capital of the Company as enlarged by the Jilin Nuoshida Subscription and the Dalian Yongli Subscription. As such, the Company will be in compliance with Rule 8.08(1)(a) of the Listing Rules immediately following the completion of the Jilin Nuoshida Subscription and the Dalian Yongli Subscription. The Company will ensure that the issue of any Subscription Shares will be withheld until the issue of such Subscription Shares would not render the public float of the Company to fall below 25%.

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EFFECT OF THE SUBSCRIPTION ON THE SHAREHOLDING STRUCTURE OF THE COMPANY

As at the Latest Practicable Date, the Company has 361,886,520 Common Shares in issue. Set out below is a table illustrates the shareholding structure of the Company (i) as at the Latest Practicable Date; (ii) immediately after the completion of the Jilin Nuoshida Subscription (assuming there is no change in the issued share capital of the Company between the Latest Practicable Date and the completion of the Jilin Nuoshida Subscription save for the allotment and issue of the Jilin Nuoshida Subscription Shares); and (iii) immediately after the completion of the Dalian Yongli Subscription and the Jilin Nuoshida Subscription (assuming there is no change in the issued share capital of the Company between the Latest Practicable Date and the completion of the Dalian Yongli Subscription and the Jilin Nuoshida Subscription save for the allotment and issue of the Dalian Yongli Subscription Shares and the Jilin Nuoshida Subscription Shares):

Non-public Shareholders Aspen Investment Holdings Ltd. (Note 1) Dalian Yongli (Note 2) Jixing (Note 3) Ms. Jing Hou (Note 4) Mr. Pingzai Wang (Note 5) Mr. Le Bo Subtotal Other Shareholders Jilin Nuoshida Public Shareholders (excluding Jilin Nuoshida) Subtotal Total	As at the Latest Practicable Date No. of Common Shares Approximate percentage (%)(Note 6) 181,194,306 50.07 60,000,000 16.58 23,600,000 6.52 3,804,540 1.05 593,167 0.16 440,000 0.12 269,632,013 74.51 — — 92,254,507 25.49 92,254,507 25.49 361,886,520 100.00	Immediately upon completion of the Jilin Nuoshida Subscription No. of Common Shares Approximate percentage (%)(Note 6) 181,194,306 49.07 60,000,000 15.88 23,600,000 6.25 3,804,540 1.01 593,167 0.16 440,000 0.12 269,632,013 71.35 16,000,000 4.23 92,254,507 24.41 108,254,507 28.65 377,886,520 100.00	Immediately upon completion of the Dalian Yongli Subscription and the Jilin Nuoshida Subscription No. of Common Shares Approximate percentage (%)(Note 6) 181,194,306 41.86 115,000,000 26.57 23,600,000 5.45 3,804,540 0.88 593,167 0.14 440,000 0.10 324,632,013 74.99 16,000,000 3.70 92,254,507 21.31 108,254,507 25.01 432,886,520 100.00	Immediately upon completion of the Dalian Yongli Subscription and the Jilin Nuoshida Subscription No. of Common Shares Approximate percentage (%)(Note 6) 181,194,306 41.86 115,000,000 26.57 23,600,000 5.45 3,804,540 0.88 593,167 0.14 440,000 0.10 324,632,013 74.99 16,000,000 3.70 92,254,507 21.31 108,254,507 25.01 432,886,520 100.00
				3.70 21.31 25.01
				100.00

Notes:

Aspen Investment Holdings Ltd. (‘‘Aspen’’) holds 181,194,306 Common Shares and is owned as to approximately 41.09% by Ji Lin Hong Yuan Trade Group Limited (‘‘JLHY’’), 39.69% by 1648557 Alberta Ltd. (‘‘164 Co’’), and 19.22% by Changchun Liyuan Investment Co. Ltd. (‘‘Liyuan’’). JLHY is held as to 60% by Mr. Jing and 40% by Mr. Guang Jing, Mr. Jing’s brother. Liyuan is owned as to approximately 98%, 1% and 1% by JLHY, Zhou Li Mei and Jing Yue Li, respectively. Mr. Le Bo (‘‘Mr. Bo’’) holds 1,000 class D voting preferred shares in 164 Co, representing approximately 99.01% voting rights of 164 Co.
Dalian Yongli is directly wholly-owned by Mr. Zhang Zhong (張鐘).

– 25 –

Jixing is directly wholly-owned by CCJGSA, which is owned as to 66.70% and 33.30% by Mr. Liu and Ms. Zhang Lijun (Mr. Liu’s spouse), respectively.
Ms. Jing Hou is the spouse of Mr. Bo.
Mr. Pingzai Wang (‘‘Mr. Wang’’) is an executive Director and holds 440,000 Common Shares. Ms. Wang Li (‘‘Ms. Wang’’), the spouse of Mr. Wang, holds 153,167 Common Shares. Accordingly, Mr. Wang is deemed, or taken to be, interested in the Common Shares which Ms. Wang is interested in for the purposes of the SFO.
Certain percentage figures in this table have been subject to rounding adjustments to the nearest 2 decimal places. Accordingly, the aggregate of the percentage figures in the above table may not add up to 100%.

GENERAL

The Subscription Shares will be allotted and issued pursuant to the Specific Mandate proposed to be obtained from the Independent Shareholders at the Meeting.

The Independent Board Committee comprising all the independent non-executive Directors, namely Mr. Richard Dale Orman, Mr. Peter David Robertson and Mr. Larry Grant Smith, has been formed to advise the Shareholders on the Subscription Agreements and the transactions contemplated thereunder.

Shareholders and potential investors should note that the Subscription is subject to the fulfillment of the condition(s) as set out in the Dalian Yongli Subscription Agreement (as amended and supplemented by the Supplemental Agreements), and that the Subscription may or may not proceed to Completion. Shareholders and potential investors are reminded to exercise caution when dealing in the Common Shares.

– 26 –

MATTERS TO BE CONSIDERED

1. Specific Mandate to Issue the Subscription Shares

At the Meeting, the Shareholders will be asked to consider and, if deemed advisable, to pass, with or without variation, an ordinary resolution granting the Board the Specific Mandate.

At the Meeting, the Shareholders will be asked to pass the following ordinary resolutions:

‘‘BE IT HEREBY RESOLVED as an ordinary resolution that:

(a) the Dalian Yongli Subscription Agreement entered into between the Company and Dalian Yongli dated June 8, 2021 (as amended and supplemented by the Supplemental Agreements), in relation to the subscription of 20,000,000 new Common Shares at HK$0.80 per Common Share, and 35,000,000 new Common Shares at the higher of (i) HK$0.80, and (ii) the volume weighted average price per Common Share as quoted on the Stock Exchange for the 30 days on which the Stock Exchange is opened for business immediately preceding the date on which the Company receives the Payment Notice (a copy of the Dalian Yongli Subscription Agreement, the First Amended and Restated Dalian Yongli Subscription Agreement and the Second Amended and Restated Dalian Yongli Subscription Agreement having been marked Exhibits ‘‘A’’, ‘‘B’’ and ‘‘C’’ and initialed by the chairman of the Meeting for identification purpose), and the transactions contemplated under the Dalian Yongli Subscription Agreement (as amended and supplemented by the Supplemental Agreements), be and are hereby approved, ratified and confirmed;
(b) conditional upon the Stock Exchange granting or agreeing to grant the listing of, and permission to deal in, the Subscription Shares, the Directors be and are hereby granted the Specific Mandate to exercise the powers of the Company for the allotment and issue of the Subscription Shares pursuant to the terms of the Dalian Yongli Subscription Agreement (as amended and supplemented by the Supplemental Agreements), provided that the Specific Mandate shall be in addition to, and shall not prejudice nor revoke any existing or such other general or specific mandates which may from time to time be granted to the directors of the Company prior to the Meeting; and
(c) any Directors and officers of the Company be and are hereby authorized to do such acts and things, to sign and execute all such further documents (in case of execution of documents under seal, to do so by any two Directors or any Director together with the secretary of the Company) and to take such steps as he/she may consider necessary, appropriate, desirable or expedient to give effect to or in connection with the issuance of the Subscription Shares or any transactions contemplated thereunder and all other matters incidental thereto or in connection therewith, and to agree to and make such variations, amendments or waivers of any of the matters relating thereto or in connection therewith.’’

– 27 –

UNLESS DIRECTED OTHERWISE, THE MANAGEMENT DESIGNEES NAMED IN THE ACCOMPANYING INSTRUMENT OF PROXY INTEND TO VOTE FOR THE RESOLUTION APPROVING THE SPECIFIC MANDATE.

2. Other Matters

Management of the Company is not aware of any other matters to come before the Meeting other than as referred to in the notice of the Meeting. Should any other matters properly come before the Meeting, the Common Shares represented by proxies solicited hereby will be voted on such matters in accordance with the best judgment of the person voting such proxy.

This Circular is being provided to Shareholders in English and Chinese. In case of any inconsistency, the English version shall prevail.

RECOMMENDATION

Your attention is drawn to the letter of recommendation from the Independent Board Committee set out on page A-1 of this Circular and the letter from Dakin set out on page B-1 of this Circular, which contains, among other matters, its advice to the Independent Board Committee and the Independent Shareholders in connection with the Dalian Yongli Subscription Agreement (as amended and supplemented by the Supplemental Agreements) and the transactions contemplated thereunder and the principal factors considered by it in arriving at its recommendation.

The Independent Board Committee, having taken into account the advice of Dakin, is of the opinion that the terms of the Subscription Agreements are fair and reasonable so far as the Independent Shareholders are concerned and the Subscription is in the interests of the Company and the Shareholders as a whole and recommend the Independent Shareholders to vote in favor of the ordinary resolution to be proposed at the Meeting to approve the Dalian Yongli Subscription Agreement (as amended and supplemented by the Supplemental Agreements) and the transactions contemplated thereunder.

The Directors (including the independent non-executive Directors) consider that the terms of the Dalian Yongli Subscription Agreement (as amended and supplemented by the Supplemental Agreements) are fair and reasonable so far as the Independent Shareholders are concerned and the Subscription is in the interests of the Company and the Shareholders as a whole, and also that the Specific Mandate is in the best interests of the Company and the Shareholders as a whole. Accordingly, the Directors (including the independent non-executive Directors) recommend the Independent Shareholders to vote in favor of the ordinary resolution to be proposed at the Meeting to approve the Dalian Yongli Subscription Agreement (as amended and supplemented by the Supplemental Agreements) and the transactions contemplated thereunder.

ADDITIONAL INFORMATION

Your attention is drawn to the additional information set out in the Schedules to this Circular.

– 28 –

Copies of the Dalian Yongli Subscription Agreement and the Supplemental Agreements will be available for inspection during normal business hours on any weekdays (except public holidays) at the principal place of business of the Company in Hong Kong at Room 1901, 19/F, Lee Garden One, 33 Hysan Avenue, Causeway Bay, Hong Kong from the date of this Circular up to and including the date of the Meeting and will be available for inspection at the Meeting.

Additional information relating to the Company may be found under the profile of the Company on SEDAR at www.sedar.com. Additional financial information is provided in the Company’s audited financial statements and related management’s discussion and analysis for the financial year ended December 31, 2020, which can be found under the profile of the Company on SEDAR at www.sedar.com. Shareholders may also request information from the Company by contacting the Company’s Chief Executive Officer at Suite 3600, 888-3rd Street S.W., Calgary, Alberta, Canada T2P 5C5.

Documents affecting the rights of securityholders, along with other information relating to the Company, can be found on the Company’s website at www.persta.ca.

The auditor of the Company is BDO Limited. BDO Limited was appointed as the auditor of the Company on March 26, 2021.

– 29 –

BOARD OF DIRECTORS APPROVAL

The contents of this Circular and the sending thereof to the Shareholders of the Company have been approved by the Board.

BY ORDER OF THE BOARD

Signed: ‘‘Yongtan Liu’’

Yongtan Liu Chairman of the Board

Calgary, Alberta Canada September 17, 2021

SCHEDULE ‘‘A’’

LETTER FROM THE INDEPENDENT BOARD COMMITTEE

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Persta Resources Inc.

(incorporated under the laws of Alberta with limited liability)

(Stock Code: 3395)

September 17, 2021

To: the Shareholders

Dear Sirs/Mesdames,

CONNECTED TRANSACTIONS IN RELATION TO THE ISSUE OF SHARES TO CONNECTED PERSON UNDER SPECIFIC MANDATE

We refer to the circular of the Company dated September 17, 2021 (the ‘‘Circular’’) of which this letter forms part. Capitalized terms used in this letter shall have the same meanings as defined in the Circular.

We have been appointed by the Board to advise the Independent Shareholders as to whether the terms of the Dalian Yongli Subscription Agreement (as amended and supplemented by the Supplemental Agreements) are fair and reasonable so far as the Company and the Independent Shareholders are concerned and whether the entering into of the Subscription is in the interests of the Company and the Shareholders as a whole. Dakin has been appointed as the Independent Financial Adviser to advise us and you in this respect.

We have considered the various details of the Subscription, in particular, the reasons for the Subscription and the effect thereof. We have also reviewed the advice given by Dakin on the terms of the Dalian Yongli Subscription Agreement (as amended and supplemented by the Supplemental Agreements) and the transactions contemplated thereunder as set out in their letter reproduced on page B-1 of the Circular.

Having considered the information set out in the letter from the Board and taking into account the advice from Dakin, we consider that the terms of the Dalian Yongli Subscription Agreement (as amended and supplemented by the Supplemental Agreements) are on normal commercial terms and are fair and reasonable so far as the Company and the Independent Shareholders are concerned, and the Subscription is in the interests of the Company and the Shareholders as a whole.

– A-2 –

Accordingly, we recommend you to vote in favor of the ordinary resolution to be proposed at the Meeting to approve the Dalian Yongli Subscription Agreement (as amended and supplemented by the Supplemental Agreements) and the transactions contemplated thereunder.

Yours faithfully,

Mr. Richard Dale Orman Mr. Peter David Robertson Mr. Larry Grant Smith Independent Board Committee

SCHEDULE ‘‘B’’

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Set out below is the text of a letter received from Dakin, the Independent Financial Adviser to the Independent Board Committee and the Independent Shareholders in respect of the Subscription for the purpose of inclusion in this Circular.

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17 September 2021

To: the Independent Board Committee and the Independent Shareholders of Persta Resources Inc.

Dear Sirs,

CONNECTED TRANSACTION PROPOSED ISSUE OF NEW SHARES TO CONNECTED PERSON UNDER SPECIFIC MANDATE

INTRODUCTION

We refer to our appointment as the independent financial adviser (the ‘‘Independent Financial Adviser’’) to the Company to advise the Independent Board Committee and the Independent Shareholders in respect of the Dalian Yongli Subscription pursuant to the Dalian Yongli Subscription Agreement (as amended and supplemented by the Supplemental Agreements and including the grant of the Specific Mandate for allotment and issue of the Subscription Shares), details of which are set out in the letter from the Board (the ‘‘Letter from the Board’’) contained in the Circular of the Company to the Shareholders dated 17 September 2021, of which this letter forms part. Unless otherwise stated, capitalised terms used in this letter shall have the same meanings as defined in the Circular.

On 8 June 2021 (after trading hours), the Company and Dalian Yongli entered into the Dalian Yongli Subscription Agreement, pursuant to which the Company has conditionally agreed to allot and issue, and Dalian Yongli has conditionally agreed to subscribe for, 20,000,000 Common Shares at the subscription price of HK$0.80 per Common Share.

On 20 July 2021 (after trading hours), the Company and Dalian Yongli entered into the First Amended and Restated Dalian Yongli Subscription Agreement, pursuant to which the Company and Dalian Yongli agreed to amend and supplement certain terms in the Dalian Yongli Subscription Agreement.

On 3 September 2021 (after trading hours), the Company and Dalian Yongli agreed to further amend and supplement certain terms in the Dalian Yongli Subscription Agreement (as amended and supplemented by the First Amended and Restated Dalian Yongli Subscription Agreement). Details

– B-2 –

of the Dalian Yongli Subscription Agreement (as amended and supplemented by the First Amended and Restated Dalian Yongli Subscription Agreement and the Second Amended and Restated Dalian Yongli Subscription Agreement) are contained in the Letter from the Board of the Circular.

The Dalian Yongli Subscription is subject to various conditions set out under the paragraph headed ‘‘Conditions of the Subscription’’ in the Letter from the Board. The Subscription Shares represent (i) approximately 15.20% of the issued Common Shares of the Company as at the Latest Practicable Date; and (ii) approximately 13.19% of the issued Common Shares of the Company as enlarged by the allotment and issue of the Subscription Shares and assuming there will be no other changes in the issued Common Shares of the Company between the Latest Practicable Date and the date of completion of the Dalian Yongli Subscription.

As stated in the Letter from the Board, (a) assuming the second tranche of 35,000,000 Common Shares to be allotted and issued to Dalian Yongli completes and the relevant subscription price per Common Share is HK$0.80, the gross proceeds and net proceeds from the Dalian Yongli Subscription are expected to be HK$44 million (approximately C$7.04 million) and HK$42.5 million (C$6.8 million) respectively; and (b) the Company intends to apply the net proceeds from the Dalian Yongli Subscription, after deduction of the estimated related expenses to be incurred in relation to the Dalian Yongli Subscription for (i) approximately 35% of the net proceeds for financing the drilling of new wells at the Western Canadian Sedimentary Basin, Canada; (ii) approximately 45% of the net proceeds for partial repayment of the Company’s subordinated debts; and (iii) approximately 20% of the net proceeds for additional working capital of the Company and other general corporate purposes.

As at the Latest Practicable Date, Dalian Yongli is interested in 60,000,000 Common Shares, representing approximately 16.58% of the issued Common Shares of the Company. As Dalian Yongli is a substantial shareholder of the Company, Dalian Yongli is a connected person of the Company. Accordingly, the entering into of the Dalian Yongli Subscription Agreement (as amended and supplemented by the Supplemental Agreements) and the transactions contemplated thereunder (including the Dalian Yongli Subscription and the issue of the Subscription Shares under the Specific Mandate) constitute connected transactions of the Company under Chapter 14A of the Listing Rules and are subject to reporting, announcement and Independent Shareholders’ approval requirements under Chapter 14A of the Listing Rules.

As at the Latest Practicable Date, 92,254,507 Common Shares are held by the public (within the meanings of the Listing Rules), representing approximately 25.49% of the issued Common Shares of the Company. Immediately upon completion of (1) the first tranche of subscription of 20,000,000 new Common Shares by Dalian Yongli under the Dalian Yongli Subscription Agreement (as amended and supplemented by the Supplemental Agreements), approximately 24.16% of the issued Common Shares of Company will be held by the public; and (2) the second tranche of subscription of 35,000,000 new Common Shares by Dalian Yongli under the Dalian Yongli Subscription Agreement (as amended and supplemented by the Supplemental Agreements), approximately 22.13% of the issued Common Shares of Company will be held by the public Accordingly, as a

– B-3 –

result of the issuance of new Common Shares pursuant to the Dalian Yongli Subscription, the Company will be unable to satisfy the minimum public float requirement of 25% as set out in Rule 8.08(1)(a) of the Listing Rules.

On 3 September 2021 (after trading hours), the Company entered into the Jilin Nuoshida Subscription Agreement with Jilin Nuoshida, pursuant to which the Company has conditionally agreed to allot and issue, and Jilin Nuoshida has conditionally agreed to subscribe for, 16,000,000 Common Shares, representing approximately 4.42% of the issued Common Shares of the Company as at the date of this Circular, at the subscription price of HK$0.80 per Common Share. To the best of the Directors’ knowledge, information and belief, and having made all reasonable enquiries, as at the Latest Practicable Date, Jilin Nuoshida is an Independent Third Party. Completion of the Jilin Nuoshida Subscription is subject to the satisfaction of the conditions precedent to the Jilin Nuoshida Subscription Agreement on or before 30 September 2021, or such other date as may be determined by the Company in its sole discretion. The 16,000,000 Common Shares to be subscribed by Jilin Nuoshida will be counted towards the public Shareholders under the Listing Rules. Immediately upon completion of (i) the Jilin Nuoshida Subscription and prior to the issuance of any new Common Shares to Dalian Yongli, a total of 108,254,507 Common Shares will be held by the public, representing approximately 28.65% of the issued Common Shares of the Company as enlarged by the Jilin Nuoshida Subscription; and (ii) the Jilin Nuoshida Subscription and the Dalian Yongli Subscription, a total of 108,254,507 Common Shares will be held by the public, representing approximately 25.01% of the issued Common Shares of the Company as enlarged by the Jilin Nuoshida Subscription and the Dalian Yongli Subscription. As such, the Company will be in compliance with Rule 8.08(1)(a) of the Listing Rules immediately following the completion of the Jilin Nuoshida Subscription and the Dalian Yongli Subscription. The Company will ensure that the issue of any Subscription Shares will be withheld until the issue of such Subscription Shares would not render the public float of the Company to fall below 25%.

The Company will seek approval from the Independent Shareholders in respect of the Dalian Yongli Subscription Agreement (as amended and supplemented by the Supplemental Agreements), the transactions contemplated thereunder and the grant of the Specific Mandate for allotment and issue of the Subscription Shares by way of a poll at the Meeting. In accordance with the Listing Rules, Dalian Yongli and their respective associates shall abstain from voting on the resolution(s) to be proposed at the Meeting to approve the Dalian Yongli Subscription Agreement (as amended and supplemented by the Supplemental Agreements), the transactions contemplated thereunder and the grant of the Specific Mandate for allotment and issue of the Subscription Shares. Save as Dalian Yongli, to the best of the knowledge, information and belief of the Directors, no other Shareholder has a material interest in the transactions contemplated under the Dalian Yongli Subscription Agreement (as amended and supplemented by the Supplemental Agreements) and will be required to abstain from voting on the resolution(s) to approve the Dalian Yongli Subscription Agreement (as amended and supplemented by the Supplemental Agreements), the transactions contemplated thereunder and the grant of the Specific Mandate for allotment and issue of the Subscription Shares at the Meeting.

– B-4 –

The Independent Board Committee, comprising all the three independent non-executive Directors, namely Mr. Richard Dale Orman, Mr. Larry Grant Smith and Mr. Peter David Robertson, has been formed to advise the Independent Shareholders on whether the terms of the Dalian Yongli Subscription Agreement (as amended and supplemented by the Supplemental Agreements), the transactions contemplated thereunder and the grant of the Specific Mandate for allotment and issue of the Subscription Shares are on normal commercial terms, fair and reasonable and in the interests of the Company and the Shareholders as a whole, and to advise the Independent Shareholders on how to vote, taking into account the recommendation of the Independent Financial Adviser.

OUR INDEPENDENCE

We, Dakin Capital Limited, have been appointed as the Independent Financial Adviser to advise the Independent Board Committee and the Independent Shareholders in this regard. Our appointment as the Independent Financial Adviser has been approved by the Independent Board Committee. During the past two years, we did not act as the financial adviser or independent financial adviser of the Company. Apart from normal professional fees for our services to the Company in connection with this engagement described above, no other arrangements exist whereby we will receive any fees and/or benefits from the Company. As at the Latest Practicable Date, we were not aware of any relationships or interests between us and the Company, or its substantial Shareholders, Directors, chief executive, or any of their respective associates. We are independent under Rule 13.84 of the Listing Rules to act as the Independent Financial Adviser to the Independent Board Committee and the Independent Shareholders in respects of the fairness and reasonableness of the terms of the Dalian Yongli Subscription Agreement (as amended and supplemented by the Supplemental Agreements), the transactions contemplated thereunder and the grant of the Specific Mandate for allotment and issue of the Subscription Shares.

BASIS OF OUR OPINION

In formulating our opinion to the Independent Board Committee and the Independent Shareholders, we have relied on the accuracy of the statements, information, opinions and representations contained or referred to in the Circular and the information and representations provided to us by the Company, the Directors and the management of the Company. We have no reason to believe that any information and representations relied on by us in forming our opinion is untrue, inaccurate or misleading, nor are we aware of any material facts the omission of which would render the information provided and the representations made to us untrue, inaccurate or misleading. We have assumed that all information, representations and opinions contained or referred to in the Circular, which have been provided by the Company, the Directors and the management of the Company and for which they are solely and wholly responsible, were true and accurate at the time when they were made and continue to be true up to the Latest Practicable Date.

The Directors collectively and individually accept full responsibility, including particulars given in compliance with the Listing Rules for the purpose of giving information with regard to the Company. The Directors, having made all reasonable enquiries, confirm that to the best of their knowledge and belief, the information contained in the Circular are accurate and complete in all material respects and not misleading or deceptive, and there are no other facts the omission of which would make any statement in the Circular misleading.

– B-5 –

We consider that we have been provided with sufficient information to reach an informed view and to provide a reasonable basis for our opinion. We have not, however, conducted any independent in-depth investigation into the business and affairs of the Company or associates, nor have we considered the taxation implication on the Company or the Shareholders as a result of the Dalian Yongli Subscription Agreement (as amended and supplemented by the Supplemental Agreements) and the transactions contemplated thereunder. Our opinion is necessarily based on the financial, economic, market and other conditions in effect and the information made available to us as at the Latest Practicable Date. Shareholders should note that subsequent developments or changes (including any material change in market, economic conditions and COVID-19) may affect and/or change our opinion and we have no obligation to update this opinion to take into account events occurring after the Latest Practicable Date or to update, revise or reaffirm our opinion. In addition, nothing contained in this letter should be construed as a recommendation to hold, sell or buy any Common Shares or any other securities of the Company.

This letter is issued for the information for the Independent Board Committee and the Independent Shareholders solely in connection with their consideration of the fairness and reasonableness of the terms of the Dalian Yongli Subscription Agreement (as amended and supplemented by the Supplemental Agreements), the transactions contemplated thereunder and the grant of the Specific Mandate for allotment and issue of the Subscription Shares and, except for its inclusion in the Circular, is not to be quoted or referred to, in whole or in part, nor shall this letter be used for any other purposes, without our prior written consent.

PRINCIPAL FACTORS AND REASONS CONSIDERED

In arriving at our opinion to the Independent Board Committee and the Independent Shareholders in respect of the fairness and reasonableness of the terms of the Dalian Yongli Subscription Agreement (as amended and supplemented by the Supplemental Agreements), the transactions contemplated thereunder and the grant of the Specific Mandate for allotment and issue of the Subscription Shares, we have considered the following principal factors and reasons:

1. Background and financial information of the Company

As stated in the Letter from the Board, the Company is principally engaged in natural gas and crude oil exploration and production, with a focus on natural gas resources. The Company focuses on long-term growth through acquisition, exploration, development and production in the Western Canadian Sedimentary Basin of its significant holdings of natural gas leases in the Western Canadian Sedimentary Basin region.

The table below is the general financial information of the Company (i) for the financial years ended 31 December 2019 and 2020 which are extracted from the Company’s annual report for the year ended 31 December 2020 (the ‘‘Annual Report’’); and (ii) for the six months ended 30 June 2020 and 2021 which are extracted from the Company’s interim results announcement for the six months ended 30 June 2021 (the ‘‘Interim Results 2021’’) respectively.

– B-6 –

Summary of the consolidated financial results and position of the Company

			For the	For the
	For the	For the	six months	six months
	year ended	year ended	ended	ended
	31 December	31 December	30 June	30 June
	2019	2020	2020	2021
	(audited)	(audited)	(unaudited)	(unaudited)
	C$’000	C$’000	C$’000	C$’000
Financial performance
Revenue
Commodity sales from
production	13,627	13,269	5,969	9,863
Trading revenue	630	8	(1)	2
Other income	78	213	83	27
Royalty expense	(2,447)	(751)	59	(937)
Total net revenue	11,888	12,739	6,110	8,955
Loss from operations	(46,203)	(16,585)	(2,225)	(2,299)
Finance expenses	(4,263)	(5,266)	(2,637)	(2,468)
Loss before taxes/Loss and
comprehensive loss	(50,466)	(21,851)	(4,862)	(4,767)
		As at	As at	As at
		31 December	31 December	30 June
		2019	2020	2021
		(audited)	(audited)	(unaudited)
		C$’000	C$’000	C$’000
Financial position
Non-current assets		55,604	41,127	38,938
Current assets		3,459	3,539	3,267
Total assets		59,063	44,666	42,205
Non-current liabilities		(5,290)	(6,028)	(30,332)
Current liabilities		(30,105)	(33,477)	(11,420)
Total liabilities		(35,395)	(39,505)	(41,752)
Net current liabilities		(26,646)	(29,938)	(8,153)
Net assets		23,668	5,161	453

– B-7 –

Annual results of the Company

As stated in the Annual Report. the Company’s revenue consists of commodity sales from production of natural gas, crude oil, natural gas liquids (‘‘NGLs’’), condensate, natural gas trading, over-riding royalty payments and income generated from source outside normal operations such as rental income and subsidies. The Company’s revenue of commodity sales from production decreased from approximately C$13.6 million for the year ended 31 December 2019 (‘‘FY2019’’) to approximately C$13.3 million for the year ended 31 December 2020 (‘‘FY2020’’), representing a decrease of approximately 2.6%. As stated in the Annual Report, such decrease of revenue of commodity sales from production was mainly due to the combined effect of (i) the increase in production and price of natural gas; which was offset by (ii) the decrease in price of crude oil as global demand collapsed in response to the COVID-19 epidemic; and (iii) the decrease in price of NGLs and condensate which are correlated with the decrease in price of crude oil. The Company’s revenue of natural gas trading decreased from approximately C$0.6 million for FY2019 to approximately C$8,000 for FY2020.

The Company’s royalty expense decreased from approximately C$2.4 million for FY2019 to approximately C$0.8 million for FY2020, representing a decrease of approximately 69.3%. As stated in the Annual Report, the Company received a gas cost allowance of C$1 million in the second quarter of 2020, following a government re-assessment of the royalties paid by the Company during 2019, whereas the Company did not receive any gas cost allowance during 2019. As a result of these credits, the Company’s effective royalty rate for FY2020 was 6%, compared to 18% for FY2019.

The Company’s other income increased from approximately C$78,000 for FY2019 to approximately C$0.2 million for FY2020, representing an increase of approximately 1.7 times. According to the Annual Report, the increase in other income was mainly attributable to payroll subsidies received from the government of Canada for COVID-19 relief. Therefore, the Company’s net revenue for FY2020 was approximately C$12.5 million, representing an increase of approximately 6.1% as compared to that of approximately C$11.8 million for FY2019.

The Company’s loss from operations reduced from approximately C$46.2 million for FY2019 to approximately C$16.6 million to FY2020. According to the management of the Company, such improvement was mainly due to (i) the decrease in impairment losses of exploration and evaluation assets of approximately C$21.7 million and the decrease in impairment losses of property, plant and equipment of approximately C$9.8 million; and partially offset by (ii) the increase in operating costs of approximately C$3.3 million.

The Company’s finance expenses increased from approximately C$4.3 million for FY2019 to approximately C$5.3 million for FY2020. As stated in the Annual Report, such increase in finance expenses was mainly attributable to the termination fee of approximately C$0.3 million and additional interest incurred from the subordinated debt.

– B-8 –

The Company’s loss for the year narrowed down from approximately HK$50.5 million for FY2019 to approximately HK$21.9 million for FY2020. As stated in the Annual Report, such improvement was primarily attributable to higher impairment losses and write-offs incurred of approximately C$41.1 million for FY2019 (FY2020: approximately C$12.7 million).

Interim result of the Company

The Company’s revenue of commodity sales from production increased from approximately C$6.0 million for the six months ended 30 June 2020 (‘‘IR2020’’) to approximately C$9.9 million for the six months ended 30 June 2021 (‘‘IR2021’’), representing an increase of approximately 65.3% as compared to the corresponding period. According to the management of the Company, such increase of revenue of commodity sales was mainly due to the increase of global demand for natural gas and crude oil, resulting in the increase in sale price of natural gas and crude oil. As stated in the Interim Results 2021, the revenue of natural gas trading for IR2021 was consistent with the comparative first half of the year in IR2020, reflecting the small quantities of gas which was traded in both periods.

The Company’s royalty expense increased to approximately C$0.9 million for IR2021, as compared with the recovery of royalty expenses of approximately C$59,000 for IR2020. As stated in the Interim Results 2021, royalty rates will fluctuate to reflect changes in production rates, market prices and cost allowances. As stated in the Interim Results 2021, (i) on a ‘‘perwell’’ basis, for IR2021 and IR2020, the Company’s base royalty rate for natural gas ranged from 5% to 21%, the base royalty rate for NGLs (propane and butane) was 30% and the base royalty rate for condensate and crude oil was 40%; (ii) effective royalty rates can differ from the base rates if the production qualifies for any cost allowances which offset the base amount payable; and (iii) the Company forecasts its effective royalty rate will range between 15-20% for the year of 2021, reflecting new production from Voyager which benefits from the Modernizing Alberta’s Royalty Framework, under which a company will pay a flat royalty of 5% on a well’s early production until the well’s total revenue from all hydrocarbon products equals the drilling and completion cost allowance.

As stated in the Interim Results 2021, other income of approximately C$27,000 for IR2021 was lower than the comparative period of IR2020 of approximately C83,000 which reflected the lower overriding royalty revenues.

Pursuant to the Interim Results 2021, the Company’s loss from operations remained at approximately C$2.2 million and C$2.3 million for IR2020 and IR2021 respectively as higher revenues generated for IR2021 were offset by the increases in operating costs.

The Company’s finance expenses decreased from approximately C$2.6 million for IR2020 to approximately C$2.5 million for IR2021. As advised by the management of the Company, the decrease in finance expenses was mainly attributable to (i) lower commitment charges incurred for IR2021 of approximately C$36,000 than approximately C$0.4 million incurred for IR2020; and partially offset by (ii) the increase in interest expenses of subordinated debt from approximately C$1.8 million for IR2020 to approximately C$2.0 million for IR2021.

– B-9 –

Financial position of the Company

As at 31 December 2020, the Company had total assets of approximately C$44.6 million (including non-current assets of approximately C$41.1 million and current assets of approximately C$3.5 million) and total liabilities of approximately C$39.5 million (including non-current liabilities of approximately C$6.0 million and current liabilities of approximately C$33.5 million). As at 30 June 2021, the Company had total assets of approximately C$42.2 million (including non-current assets of approximately C$38.9 million and current assets of approximately C$3.3 million) and total liabilities of approximately C$41.7 million (including non-current liabilities of approximately C$30.3 million and current liabilities of approximately C$11.4 million).

As at 31 December 2020, the net assets of the Company was approximately C$5.1 million, representing a decrease of approximately 78.2% as compared to that of approximately C$23.7 million as at 31 December 2019. The net assets of the Company further decreased from approximately C$5.1 million as at 31 December 2020 to approximately C$0.4 million as at 30 June 2021, representing a decrease of approximately 91.2%. According to the management of the Company, such decrease in net assets of the Company was mainly due to the losingmaking position of the Company for FY2020 and IR2021.

We noted that the Company recorded a net current liabilities of approximately C$8.2 million as at 30 June 2021, representing a net working capital deficit of the Company. According to the Company’s announcement of unaudited results for the three months ended 31 March 2021, as at 31 March 2021, the current portion of long term debt amounted to approximately C$24.1 million, which included subordinated debt with principal amount of approximately C$23.6 million bearing base interest at 12% per annum; because the Company was not in compliance with the net debt (net debt is defined as the consolidated debt of the Company, less cash held, and excluding debt defined as capital payables) to trailing twelve months earnings before interest, taxes and depreciation (‘‘TTM EBITDA’’ which is defined as the annualized earnings before deduction of interest expenses/income, income taxes, depletion and depreciation, writeoffs, unrealized hedging gains/losses and share-based compensation for the four most recent fiscal quarters) not to exceed 4.5:1.0, working capital (working capital is defined as the ratio of current assets to current liabilities. Current assets include the current assets as per the Company’s financial statements excluding any unrealized hedging gains. Current liabilities include the current liabilities as per the Company’s financial statements excluding any unrealized hedging losses, and excluding any amounts held in current liabilities for the subordinated debt principal amount owing (amounts held in current liabilities for the subordinated debt accrued and unpaid interest are included)) of not less than 1.2:1.0 and net debt to total proved reserves covenants not to exceed 0.75:1.0, and therefore the subordinated debt was due on demand. According to the Interim Results 2021, on 30 June 2021, the Company and lender agreed to restructure the loan agreement (the ‘‘2021 Restructuring’’). Under the terms of the 2021 Restructuring and according to the management of the Company, the lender waived financial covenants in respect of net debt to total proved reserves and net debt to TTM EBITDA for the remainder of 2021 and the breaches which occurred at March 31 2021. Financial covenants in respect of working capital have been eliminated for the

– B-10 –

remainder of the loan term. Pursuant to the 2021 Restructuring and according to the management of the Company, the subordinated debt is subject to the following covenants for 2021 (a) the Company must secure additional capital in the form of new equity for a cumulative amount equal to or greater than C$8 million on or before 15 October 2021 (the ‘‘2021 Funding Covenant’’) and; (b) measured at the end of each fiscal quarter maintaining the Company’s Alberta Energy liability management ratio above 2.0/1.0 (the ‘‘LMR Covenant’’, for illustration purpose only, as advised by the Directors, the Company’s Alberta Energy liability management ratio as determined by the Government of Alberta, was 22.0:1.0 as at 30 June 2021; and (c) a C$2.2 million principal payment on or before 30 September 2021 and a C$2.2 million principal payment on or before 15 October 2021 (together, the’’2021 Principal Payments’’). Pursuant to the 2021 Restructuring, the PIK Interest (the Company and lender agreed to restructure the loan agreement on 28 April 2020 (the ‘‘2020 Restructuring’’), pursuant to which the Company incurs an additional 2% per annum interest charge, which is due until the net debt to TTM EBITDA ratio is below 3.0) and Penalty Interest (pursuant to the 2020 Restructuring, a further 2% per annum additional interest is also due) payments will terminate when the loan balance is below C$20 million, and the loan interest rate will reduce to 10% when the loan balance is below C$15 million.

Given that (i) the Company has to secure additional capital in the form of new equity for a cumulative amount equal to or greater than C$8 million on or before 15 October 2021 to meet the 2021 Funding Covenant; and (ii) the Company has to make a C$2.2 million principal payment on or before 30 September 2021 and a C$2.2 million principal payment on or before 15 October 2021 to meet the 2021 Principal Payments covenant, we are of the view and concur with the view of Directors that the Company has immediate funding need to improve its financial position and repay part of the outstanding principal amount of the subordinated debt.

2. Background of Dalian Yongli and commercial rationale for the Dalian Yongli Subscription

Dalian Yongli Petrochemcial Ltd.

Dalian Yongli is a company incorporated under the laws of the PRC with limited liability whose ultimate beneficial owner is Mr. Zhang Zhong (張鐘). Dalian Yongli is principally engaged in the sales and trading of petroleum and natural gas products. Other than being a substantial shareholder of the Company, to the best knowledge, information and belief of the Board and after making all reasonable enquiries, Dalian Yongli and its ultimate beneficial owner are third parties independent of and not connected with the Company and its connected persons.

– B-11 –

Commercial rationale of the Subscription

As stated in the Annual Reports and the Interim Results 2021, we noted that there was an increasing trend in the Company’s gearing ratio, which is defined as net debt as a percentage of total capital (‘‘Gearing Ratio’’), of 56%, 87% and 99% as at 31 December 2019, 31 December 2020 and 30 June 2021 respectively. According to the Annual Report and the Interim Results 2021, we also noted that the Company’s interest expenses in relation to the subordinated debt increased (i) from approximately C$3.0 million for FY2020 to approximately C$3.7 million for FY2021; and (ii) from approximately C$1.8 million for IR2020 to approximately C$2.0 million for IR2021. Furthermore, pursuant to the 2021 Restructuring, the PIK Interest and Penalty Interest payments will terminate when the loan balance is below C$20 million, and the loan interest rate will reduce to 10% when the loan balance is below C$15 million.

Taking into account (i) the reasons for and benefits of the Dalian Yongli Subscription as mentioned in the paragraph headed ‘‘3. Reasons for and benefits of the issue of the Subscription Shares’’ below in this letter; (ii) the Subscription would decrease the interest expenses of the Company given that the PIK Interest and Penalty Interest payments will terminate when the loan balance is below C$20 million, and the loan interest rate will reduce to 10% when the loan balance is below C$15 million pursuant to the 2021 Restructuring; (iii) the Subscription Price is fair and reasonable as analyzed in the paragraph headed ‘‘4. Principal terms of the Dalian Yongli Subscription Agreement (as amended and supplemented by the Supplemental Agreements)’’ below in this letter; and (iv) other financing alternative may not be feasible as analyzed in the paragraph headed ‘‘5. Other financing alternatives’’ below in this letter, we concur with the view of the Directors that the Dalian Yongli Subscription would broaden the Company’s capital base, lower its Gearing Ratio and reduce the interest expenses of the Company.

3. Reasons for and benefits of the issue of the Subscription Shares

As stated in the Letter from the Board, the global impact of the outbreak of COVID-19 has resulted in significant volatility in global stock markets and oil and natural gas prices over the past year, which has impacted the Company’s revenues. This volatility is expected to continue while restrictions on local and international travel remain in place, which could negatively impact the Company’s future revenues should prices decline. On 30 June 2021 the Company and lender agreed to restructure its subordinated debt. Pursuant to the 2021 Restructuring and according to the management of the Company, the Company must secure additional capital in the form of new equity for a cumulative amount equal to or greater than C$8 million on or before 15 October 2021, make a C$2.2 million principal payment on or before 30 September 2021, and make a C$2.2 million principal payment on or before 15 October 2021 (Please refer to note 13 of the Company’s Annual Report for additional details in respect of the 2021 Restructuring). Pursuant to the Letter from the Board, due to the volatile commodity price environment and obligations associated with the 2021 Restructuring, the Company is in need of additional capital.

– B-12 –

The Board is of the view that the allotment and issue of the Subscription Shares is an appropriate means of raising additional capital for the business operations of the Company since it will provide the Company with immediate funding to satisfy its 2021 Restructuring obligation and new drilling to increase production and revenue. Assuming the second tranche of 35,000,000 Common Shares to be allotted and issued to Dalian Yongli completes and the relevant subscription price per Common Share is HK$0.80, the gross proceeds and net proceeds from the Dalian Yongli Subscription are expected to be HK$44 million (approximately C$7.04 million) and HK$42.5 million (C$6.8 million) respectively. The Company intends to apply the net proceeds from the Dalian Yongli Subscription, after deduction of the estimated related expenses to be incurred in relation to the Dalian Yongli Subscription for (i) approximately 35% of the net proceeds for financing the drilling of new wells at the Western Canadian Sedimentary Basin, Canada; (ii) approximately 45% of the net proceeds for partial repayment of the Company’s subordinated debts; and (iii) approximately 20% of the net proceeds for additional working capital of the Company and other general corporate purposes. As detailed below, the Company must make a payment of C$2.2 million in respect of its subordinated debt facility on or before 30 September 2021 and an additional payment of C$2.2 million in respect of the same debt facility on or before 15 October 2021. The Company will apply the C$2.048 million proceeds from the Jilin Nuoshida Subscription to partially satisfy the C$2.2 million debt payment due 30 September 2021. The Company will apply the C$6.8 million proceeds from the Dalian Yongli Subscription to satisfy in full (1) any amount not yet fully repaid under the debt payment due 30 September 2021 (which amount to C$0.152 million); and (2) the debt payment due 15 October 2021 of C$2.2 million. Excess proceeds of C$4.448 million (assuming the Subscription Price of the second tranche the Subscription Shares will be HK$0.80 per Common Share) will be directed towards the funding of new drilling at the Company’s Basing area which the Company intends to undertake in October 2021, and working capital as required following receipt of the subscription proceeds. The Board considers that (i) the Dalian Yongli Subscription Agreement (as amended and supplemented by the Supplemental Agreements) is entered into upon normal commercial terms following arm’s length negotiations between the Company and Dalian Yongli; (ii) the terms of the Dalian Yongli Subscription Agreement (as amended and supplemented by the Supplemental Agreements and including the Subscription Price) are on normal commercial terms and are fair and reasonable; and (iii) the Dalian Yongli Subscription is in the interests of the Company and the Shareholders as a whole.

– B-13 –

Principal terms of the Dalian Yongli Subscription Agreement (as amended and supplemented by the Supplemental Agreements)

Pursuant to the Dalian Yongli Subscription Agreement (as amended and supplemented by the Supplemental Agreements), the Company and Dalian Yongli have agreed to amend and supplement certain terms in the Dalian Yongli Subscription Agreement, the Company has conditionally agreed to allot and issue, and Dalian Yongli has conditionally agreed to subscribe for, 55,000,000 Common Shares at the following terms:

Number of new Common Shares to be subscribed by Dalian Yongli

The Company has conditionally agreed to allot and issue, and Dalian Yongli has conditionally agreed to subscribe for, 20,000,000 Common Shares at the Subscription Price of HK$0.80 per Common Share and 35,000,000 Common Shares at the higher of (i) HK$0.80, and (ii) the volume weighted average price per Common Share as quoted on the Stock Exchange for the 30 Trading Days immediately preceding the date on which the Company receives an irrevocable notice from Dalian Yongli notifying the Company that it will make payment for the second tranche of 35,000,000 Common Shares in full.

Completion of the subscription of new Common Shares by Dalian Yongli

Subject to fulfillment of the conditions of the Dalian Yongli Subscription Agreement (as amended and supplemented by the Supplemental Agreements), completion of the subscription of new Common Shares by Dalian Yongli will be in two tranches as follows:

(1) the first tranche of 20,000,000 Common Shares will be allotted and issued to Dalian Yongli on the date upon which all of the conditions has been satisfied; and
(2) the second tranche of 35,000,000 Common Shares will be allotted and issued to Dalian Yongli within one day after the Company receives the Payment Notice from Dalian Yongli notifying the Company that Dalian Yongli will make payment for the second tranche of 35,000,000 Common Shares in full, provided that it shall be a date on or before 15 October 2021.

If Dalian Yongli fails to deliver the Payment Notice to the Company on or before 15 October 2021, the Dalian Yongli Subscription Agreement (as amended and supplemented by the Supplemental Agreements) shall automatically terminate with immediate effect pursuant to their terms and the parties thereto shall be released from all liabilities and obligations under the Dalian Yongli Subscription Agreement (as amended and supplemented by the Supplemental Agreements) (except for their accrued right or obligations at the date of termination and the respective surviving clauses).

– B-14 –

The Dalian Yongli Subscription are subject to various conditions set out under the paragraph headed ‘‘Conditions of the Subscription’’ in the Letter from the Board. The Subscription Shares represent approximately 15.20% of the issued Common Shares of the Company as at the Latest Practicable Date and approximately 13.19% of the issued Common Shares of the Company as enlarged by the allotment and issue of the Subscription Shares, subject to the completion of the Dalian Yongli Subscription and assuming there will be no other changes in the issued Common Shares of the Company between the Latest Practicable Date and the date of completion of the Dalian Yongli Subscription.

Please refer to the paragraph headed ‘‘Background to the Subscription’’ in the Letter from the Board for further details of the Dalian Yongli Subscription Agreement (as amended and supplemented by the Supplemental Agreements).

We have reviewed the following terms of the Dalian Yongli Subscription Agreement (as amended and supplemented by the Supplemental Agreements). In order to assess the fairness and reasonableness of the Subscription Price, we have compared with reference to (i) the recent price performance of the Common Shares; (ii) the trading liquidity of the Common Shares; and (iii) the market comparables analysis, as follows:

4.1 The Subscription Price

The Subscription Price of HK$0.80 (assuming the subscription price per Common Share of the second tranche of 35,000,000 Common Shares to be allotted and issued to Dalian Yongli will be HK$0.80) per Common Share represents:

(1) a premium of approximately 119% to the closing price of HK$0.365 per Common Share as quoted on the Stock Exchange on the Last Trading Day, being 7 June 2021;
(2) a premium of approximately 122% to the average closing price of HK$0.361 per Common Share as for the last 5 consecutive trading days up to and including the Last Trading Day, being 7 June 2021;
(3) a premium of approximately 123% to the average closing price of HK$0.358 per Common Share as for the last 10 consecutive trading days up to and including the Last Trading Day, being 7 June 2021;
(4) a premium of approximately 100% to the average closing price of HK$0.399 per Common Share as for the last 30 consecutive trading days up to and including the Last Trading Day, being 7 June 2021;
(5) a premium of approximately 96% to the average closing price of HK$0.408 per Common Share as for the last 45 consecutive trading days up to and including the Last Trading Day, being 7 June 2021;
(6) a premium of approximately 19% to the closing price of HK$0.67 per Common Share as at 18 February 2021, the last trading day when the total trade volume exceeded 1 million Common Shares; and
(7) a premium of approximately 36% to the closing price of HK$0.59 per Common Share as at the Latest Practicable Date.

– B-15 –

As stated in the Letter from the Board, the Subscription Price was determined after arm’s length negotiations between the Company and Dalian Yongli after considering, among other things, the Company’s past performance and future prospects and in particular, the market performance and liquidity of the Common Shares.

4.2 Historical performance of Common Share price

The historical closing prices of the Common Shares for the period from 7 June 2020, being the preceding twelve-month from the date of the Dalian Yongli Subscription Agreement (the ‘‘Review Period’’), are plotted below against the Subscription Price.

==> picture [423 x 210] intentionally omitted <==

----- Start of picture text -----

HK$ Historical daily closing price of Common Share
0.800
Subscription Price of HK$0.8 per Common Share
0.700
0.600
0.500
0.400
0.300
0.200
8/6/2020 8/7/2020 8/8/2020 8/9/2020 8/10/20208/11/2020 8/12/2020 8/1/2021 8/2/2021 8/3/2021 8/4/2021 8/5/2021 8/6/2021
----- End of picture text -----

Source: Website of the Stock Exchange

During the Review Period, the closing price of Common Shares was on a sideways trend throughout the majority of the Review Period. It is noted there was a general upward trend of the closing price of Common Shares since 18 February 2021 when the closing price of Common Shares increased from HK$0.285 on 17 February 2021 to HK$0.67 on 18 February 2021, since then the closing price of Common Shares fluctuated in the range of HK$0.33 to HK$0.51 during the period from 19 February 2021 to 20 July 2021. We have reviewed the announcements published by the Company at the relevant time, nothing has come to our attention that any of the announcements made by the Company maybe price sensitive. We have further discussed with the management of the Company and are given to understand that they are not aware of any price sensitive information at the relevant time. The closing price of Common Shares ranged between HK$0.26 and HK$0.67, with an average of approximately HK$0.36 during the Review Period.

– B-16 –

The Subscription Price of HK$0.80 (i) represents a premium of approximately 122% over the average closing price of Common Shares of approximately HK$0.36 during the Review Period; and (ii) is higher than all the closing prices of Common Shares during the Review Period.

4.3 Trading volume of Common Shares

Set out below are the average daily trading volumes of the Common Shares during the Review Period.

		Percentage of average
		daily trading volumes
	Average daily	over the issued
	trading volumes	Common Shares of
	during the	the Company as at
	period/month	period/month end
	(Common Shares)	(approximate %)
2020
From 7 June 2020 to 30 June 2020	3,375	0.001
July	47,364	0.015
August	14,238	0.005
September	10,273	0.003
October	75,611	0.025
November	24,524	0.008
December	15,682	0.004
2021
January	43,776	0.012
February	357,333	0.099
March	29,043	0.008
April	13,842	0.004
May	3,100	0.001
From 1 June 2021 to 8 June 2021	5,000	0.001

Source: Website of the Stock Exchange

As illustrated above, the percentage of average daily trading volumes over the issued Common Shares of the Company as at month end ranged from 0.001% to approximately 0.099% during the Review Period, which is considered low compared with the number of Subscription Shares.

– B-17 –

4.4 Comparable analysis of the Subscription Price

In assessing whether the Subscription Price is fair and reasonable, we carried out a comparable analysis on the issue of new shares to connected persons (the ‘‘Shares Issue Comparables’’) as announced by companies listed on the Main Board of the Stock Exchange (excluding those (i) issue of A shares by issuers incorporated in the PRC; and (ii) issuers which have prolonged suspension of trading of shares over twelve months) from 7 December 2020, being the precedent six months from the date of the Dalian Yongli Subscription Agreement. We consider that the period are representative because it demonstrates the recent market sentiments and practice prior to the date of the Dalian Yongli Subscription Agreement. We also consider that the Shares Issue Comparables are meaningful, fair and representative for reflecting the recent market environment regarding subscription of new shares by connected persons.

Based on the aforesaid selection criteria, we have identified an exhaustive list of 12 Shares Issue Comparables, details of which are set out below:

				Premium/(Discount) of	Premium/(Discount) of
				subscription price over/	subscription price over/
				(to) closing price per	(to) average closing
				share on the last	price per share on the
				trading day prior to/on	last 5 trading days
				the date of relevant	prior to/on the date of
		Stock	Date of initial	announcement/	relevant announcement/
No.	Name of company	code	announcement	agreement	agreement
				(%)	(%)
1.	Kinergy Corporation Limited	3302	15 December 2020	(17.81)	(19.79)
2.	China Dredging Environment	871	14 January 2021	11.11	17.65
	Protection Holdings Limited
3.	China Finance Investment	875	20 January 2021	(18.37)	(19.84)
	Holdings Limited
4.	Pak Tak International Limited	2668	20 January 2021	(1.96)	(10.15)
5.	Risecomm Group Holdings	1679	25 January 2021	18.81	14.61
	Limited
6.	Carrianna Group Holdings	126	8 March 2021	(10.00)	(12.45)
	Company Limited
7.	Qidian International Co., Limited	1280	7 April 2021	0.00	3.83
8.	Meituan	3690	20 April 2021	(5.33)	(4.01)
9.	E-House (China) Enterprise	2048	28 April 2021	0.00	(0.13)
	Holdings Limited
10.	Zhong Ji Longevity Science	767	10 May 2021	(12.16)	(16.45)
	Group Limited
11.	Hong Kong Resources Holdings	2882	31 May 2021	(15.25)	(15.25)
	Company Limited

– B-18 –

				Premium/(Discount) of	Premium/(Discount) of
				subscription price over/	subscription price over/
				(to) closing price per	(to) average closing
				share on the last	price per share on the
				trading day prior to/on	last 5 trading days
				the date of relevant	prior to/on the date of
		Stock	Date of initial	announcement/	relevant announcement/
No.	Name of company	code	announcement	agreement	agreement
				(%)	(%)
12.	DTXS Silk Road Investment	620	4 June 2021	(8.43)	(4.43)
	Holdings Company Limited
			Mean	(4.95)	(5.54)
			Median	(6.88)	(7.29)
			Maximum	18.81	17.65
			Minimum	(18.37)	(19.84)
	The Dalian Yongli Subscription	3395	8 June 2021	119.18	121.61
	Agreement

Source: Website of the Stock Exchange

As indicated in the above table, we noted that (i) the premium of approximately 119.18% represented by the Subscription Price over the closing price per Common Share on the Last Trading Day (7 June 2021) is higher than that of the Shares Issue Comparables, which ranges from a discount of approximately 18.37% to a premium of approximately 18.81%; and (ii) the premium of approximately 121.61% represented by the Subscription Price over the average closing price per Common Share on the last five trading days up to and including the Last Trading Day (7 June 2021) is higher than that of the Shares Issue Comparables, which ranges from a discount of approximately 19.84% to a premium of approximately 17.65%.

In addition, we have taken into account the following factors:

(i) the Subscription Price of HK0.80 per Common Share represents a premium over the highest closing price of Common Shares of HK$0.67 throughout the Review Period;
(ii) the Company was in loss-making position for FY2019, FY2020 and IR2021; and
(iii) the Subscription Price of HK0.80 per Common Share represents an implied price-tobook ratio of approximately 103.0x, which is higher than the price-to-book ratio for China CBM Group Company Limited (8270.HK) of approximately 0.42x based on the close price of it’s share as at the Latest Practicable Date, the only one listed company on the Stock Exchange principally engaged in natural gas exploration and production with a market capitalization of less than HK$1 billion.

– B-19 –

Based on the above, we are of the view that the Subscription Price is fair and reasonable so far as the Independent Shareholders are concerned, and in the interest of the Company and Shareholders as a whole.

4.5 Arrangement for the second tranche of subscription under the Second Amended and Restated Dalian Yongli Subscription Agreement

Pursuant to the Second Amended and Restated Dalian Yongli Subscription Agreement, the Company has conditionally agreed to allot and issue, Dalian Yongli has conditionally agreed to subscribe for the second tranche of 35,000,000 Common Shares (the ‘‘Second Tranche Subscription’’) at the higher of (i) HK$0.80, and (ii) the volume weighted average price per Common Share quoted on the Stock Exchange for the 30 Trading Days immediately preceding the date on which the Company receives the Payment Notice from Dalian Yongli (the ‘‘VWAP Subscription Price’’).

As stated in the Letter from the Board, the subscription tranche arrangement guarantees a minimum price of HK$0.80 per Common Share if the volume weighted average price per Common Share as quoted on the Stock Exchange for the 30 Trading Days immediately preceding the date on which the Company receives the Payment Notice from Dalian Yongli is at or below HK$0.80 per Common Share. In light of this, we have obtained and reviewed the Second Amended and Restated Dalian Yongli Subscription Agreement, discussed with the management of the Company and are advised that as the Board was notified by Dalian Yongli subsequent to the signing of the Dalian Yongli Subscription Agreement that Dalian Yongli would need additional time to arrange for the payment of the subscription proceeds in full and since the Company was in imminent need of capital to reduce its debt level, the Company and Dalian Yongli agreed to incorporate the subscription in two tranches arrangement to ensure Dalian Yongli could pay for the subscription proceeds in full.

Since the subscription price for the Second Tranche Subscription is set to be at least HK$0.8 per Common Share which is the same as the subscription price for the subscription of first tranche of 20,000,000 Common Shares by Dalian Yongli, we concur with the view of the management of the Company that the gross proceeds of HK$28 million for the Second Tranche Subscription is safeguarded. Notwithstanding that we at present cannot predict the future trend of the Company’s share price, we concur with the view of the management of the Company that the Company would obtain more gross proceeds from the Second Tranche Subscription if the VWAP Subscription Price is higher than HK$0.8 per Common Share, of which would be used for the Second Tranche Subscription.

Having considered (i) the arrangement for Second Tranche Subscription guarantees a minimum subscription price of HK$0.80 per Common Share which safeguards the gross proceeds to be raised; (ii) the pricing of Second Tranche Subscription which also takes into account the higher of VWAP Subscription Price offer an opportunity for the Company to obtain more gross proceeds from the Second Tranche Subscription if the VWAP Subscription Price is higher than HK$0.8 per Common Share; (iii) the Company

– B-20 –

has immediate funding need to improve its financial position and repay part of the outstanding principal amount of the subordinated debt as discussed in the paragraph headed ‘‘1. Background and financial information of the Company’’ above in this letter; (iv) the Subscription Price is fair and reasonable as discussed above in this paragraph; and (v) other financing alternative may not be feasible as analyzed in the paragraph headed ‘‘5. Other financing alternatives’’ below in this letter, we are of the view and concur with the view of the management of the Company that the arrangement for the Second Tranche Subscription by Dalian Yongli is fair and reasonable so far as the Independent Shareholders are concerned, and in the interest of the Company and Shareholders as a whole.

4.6 Other terms of the Dalian Yongli Subscription Agreement (as amended and supplemented by the Supplemental Agreements)

Furthermore, we have also reviewed other terms of the Dalian Yongli Subscription Agreement (as amended and supplemented by the Supplemental Agreements), including, among others, the conditions precedent. Please refer to the paragraph headed ‘‘Conditions of the Subscription’’ in the Letter from the Board for further details of the conditions precedent.

Pursuant to the terms of the Dalian Yongli Subscription Agreement (as amended and supplemented by the Supplemental Agreements) and as discussed with the management of the Company, we understand that the Company will not allot and issue any Common Shares to Dalian Yongli until payment by Dalian Yongli, and the receipt by the Company of, the subscription price corresponding to each tranche of Dalian Yongli Subscription Shares in full. In addition, as advised by the management of the Company, all of the conditions precedent set out in the Dalian Yongli Subscription Agreement (as amended and supplemented by the Supplemental Agreements) have to be fulfilled and no waivers are granted. As such, we are of the view that the Company’s and Shareholders’ interest are safeguarded. Based on the above, nothing has come to our attention that the other terms of the Dalian Yongli Subscription Agreement (as amended and supplemented by the Supplemental Agreements) are not on normal commercial terms and not fair and reasonable.

– B-21 –

Having considered (i) the reasons for and benefits of the issue of the Subscription Shares as mentioned above in this letter; and (ii) the comparable analysis on the Subscription Price as analyzed in the Shares Issue Comparables, we are of the view that the Dalian Yongli Subscription Agreement (as amended and supplemented by the Supplemental Agreements) are on normal commercial terms and the terms of the Dalian Yongli Subscription are fair and reasonable.

5. Other financing alternatives

As advised by the Directors, other financing alternatives, including debt financing and other forms of equity financing such as rights issue, open offer and placing of new shares to Independent Third Parties, have been considered.

Debt financing

According to the management of the Company, further borrowing would create additional interest expenses for the Company and the due diligence and negotiation process with the relevant banks/financial institutions may be lengthy, and debt financing would also increase the Company’s Gearing Ratio which has increased from 56% as at 31 December 2019 to 99% as at 30 June 2021. As mentioned in the paragraph headed ‘‘1. Background and financial information of the Company’’ above in this letter, the Company was in net current liabilities position of approximately C$8.2 million as at 30 June 2021.

In light of this, we have obtained the facility letter, the restructuring agreement dated 28 April 2020 and the restructuring agreement dated 30 June 2021 signed between the Company and the lender. Pursuant to the 2021 Restructuring, the Company and the lender agreed to new terms and covenants of the subordinated debt. For details of the 2021 Restructuring, please refer to the paragraph headed ‘‘1. Background and financial information of the Company’’ above in this letter.

Pursuant to the 2021 Restructuring and according to the management of the Company, the PIK Interest and Penalty Interest payments will terminate when the loan balance is below C$20 million, and the loan interest rate will reduce to 10% when the loan balance is below C$15 million. Furthermore, pursuant to the 2021 Restructuring and according to the management of the Company, (i) the Company has to secure additional capital in the form of new equity for a cumulative amount equal to or greater than C$8 million on or before 15 October 2021 to meet the 2021 Funding Covenant; and (ii) the Company has to make a C$2.2 million principal payment on or before 30 September 2021 and a C$2.2 million principal payment on or before 15 October 2021 to meet the 2021 Principal Payments covenant, we are of the view and concur with the view of Directors that the Company has immediate funding need to improve its financial position and repay part of the outstanding principal amount of the subordinated debt.

– B-22 –

Therefore, the Directors are of the view that there is a near term funding need in the form of new equity for a cumulative amount equal to or greater than C$8 million on or before 15 October 2021 to meet the 2021 Funding Covenant, instead of incurring further debt financing.

Other forms of equity financing

We are advised by the Directors that although both open offer and rights issue would allow the Shareholders to participate in the subscription of new Common Shares and maintain their respective pro-rata shareholdings in the Company, it would incur additional costs such as underwriting commission, documentation costs of filing of a prospectus and the printing and handling of application forms and other professional fees of approximately three to four times than that of the Dalian Yongli Subscription and take a relatively longer timeframe of more than three months from the dispatch of the circular to commencement of dealing in the offer shares or rights shares (as the case may be) when compared to the Dalian Yongli Subscription of normally one month from the dispatch of the circular pertaining to an issue of Common Shares under Specific Mandate to dealing in the new Common Shares. Regarding placing of new shares to Independent Third Parties, the Directors are of the view that placing with Dalian Yongli would provide an efficient means of raising capital for the Company’s present needs as mentioned in the paragraph headed ‘‘2. Background of Dalian Yongli and commercial rationale for the Dalian Yongli Subscription’’ above in this letter. As advised by the Directors, given the price performance of the Common Shares and uncertainty in the global capital markets, the Company was unable to engage an underwriter to arrange rights issue, open offer and placing of new shares to Independent Third Parties. As such, the Directors are of the view that rights issue, open offer and placing of new shares to Independent Third Parties may not be the most appropriate methods for its fund raising exercise and is comparatively less advantageous than the Dalian Yongli Subscription.

After considering (i) the Company’s intended use of proceeds from the Dalian Yongli Subscription as discussed in the paragraph headed ‘‘3. Reasons for and benefits of the issue of the Subscription Shares’’ above in this letter; (ii) debt financing would incur additional interest expenses to the Company, lead to lengthy due diligence and negotiations process with the relevant banks/financial institutions and increase the Company’s Gearing Ratio which has already increased from 56% as at 31 December 2019 to 99% as at 30 June 2021; (iii) there is a near term funding need in the form of new equity for a cumulative amount equal to or greater than C$8 million on or before 15 October 2021 to meet the 2021 Funding Covenant; (iv) higher costs and relatively longer timeframe in the case of open offer or rights issue; and (v) placing with Dalian Yongli would provide an efficient means of raising capital for the Company’s present needs, we are of the view and concur with the view of Directors that the Dalian Yongli Subscription will broaden the Company’s capital base, lower the Company’s Gearing Ratio, and allow the Company to meet the 2021 Funding Covenant and facilitate the Company to meet the 2021 Principal Payments covenant.

– B-23 –

6. Potential dilution effect on the shareholding of the Company

As set out in the table showing the change in shareholding structure of the Company in the paragraph headed ‘‘Effect of the Subscriptions on the shareholding structure of the Company’’ in the Letter from the Board, the shareholding in the Company held by existing public Shareholders would be diluted from approximately 25.49% as at the Latest Practicable Date to approximately 22.13% immediately upon completion of the subscription of a total of 55,000,000 new Common Shares by Dalian Yongli under the Dalian Yongli Subscription Agreement (as amended and supplemented by the Supplemental Agreements). Such dilution effect is for illustration purpose only as the Company will be unable to satisfy the minimum public float requirement of 25% as set out in Rule 8.08(1)(a) of the Listing Rules. As stated in the Letter from the Board, on 3 September 2021 (after trading hours), the Company entered into the Jilin Nuoshida Subscription Agreement with Jilin Nuoshida, pursuant to which the Company has conditionally agreed to allot and issue, and Jilin Nuoshida has conditionally agreed to subscribe for, 16,000,000 Common Shares, representing approximately 4.42% of the issued Common Shares of the Company as at the date of this Circular, at the subscription price of HK$0.80 per Common Share. To the best of the Directors’ knowledge, information and belief, and having made all reasonable enquiries, as at the Latest Practicable Date, Jilin Nuoshida is an Independent Third Party. The 16,000,000 Common Shares to be subscribed by Jilin Nuoshida will be counted towards the public Shareholders under the Listing Rules. Immediately upon completion of (i) the Jilin Nuoshida Subscription and prior to the issuance of any new Common Shares to Dalian Yongli, a total of 108,254,507 Common Shares will be held by the public, representing approximately 28.65% of the issued Common Shares of the Company as enlarged by the Jilin Nuoshida Subscription; and (ii) the Jilin Nuoshida Subscription and the Dalian Yongli Subscription, a total of 108,254,507 Common Shares will be held by the public, representing approximately 25.01% of the issued Common Shares of the Company as enlarged by the Jilin Nuoshida Subscription and the Dalian Yongli Subscription. As such, the Company will be in compliance with Rule 8.08(1)(a) of the Listing Rules immediately following the completion of the Jilin Nuoshida Subscription and the Dalian Yongli Subscription. The Company will ensure that the issue of any Subscription Shares will be withheld until the issue of such Subscription Shares would not render the public float of the Company to fall below 25%.

Taking into account (i) the loss-making position of the Company for FY2019, FY2020 and IR2021 and the net current liabilities position of the Company as at 30 June 2021; (ii) other financing alternative may not be feasible as analyzed in the paragraph headed ‘‘5. Other financing alternatives’’ above in this letter; (iii) there is a near term funding need in the form of new equity for a cumulative amount equal to or greater than C$8 million on or before 15 October 2021 to meet the 2021 Funding Covenant; (iv) the Dalian Yongli Subscription will broaden the capital base of the Company and will immediately improve the net current liabilities position of the Company; and (v) the terms of the Dalian Yongli Subscription are fair and reasonable as mentioned in paragraph headed ‘‘4. Principal terms of the Dalian Yongli Subscription Agreement (as amended and supplemented by the Supplemental Agreements)’’ above in this letter, we consider that the potential dilution effect on the shareholding of existing public Shareholders in the Company is acceptable.

– B-24 –

7. Financial effect of the Dalian Yongli Subscription

Net assets and gearing

According to the Interim Results 2021, the Company’s current liabilities exceeded its current assets of approximately C$8.2 million as at 30 June 2021. Pursuant to the Interim Results 2021, the Company’s net assets was approximately C$0.4 million as at 30 June 2021 and the Gearing Ratio of the Company was approximately 99%. Upon allotment and issue of the Subscription Shares and the receipt of net proceeds from the Dalian Yongli Subscription, the Company’s assets and equity will increase and Gearing Ratio will decrease. Assuming that there is no material change on the asset position of the Company from 30 June 2021 to completion of the Dalian Yongli Subscription, the Company’s net assets will increase when compared with that of 30 June 2021.

Working Capital

As stated in the Letter from the Board, approximately 45% of the fund raised from the Dalian Yongli Subscription will be applied for partial repayment of the subordinated debts, and thus working capital of the Company will be improved. Also, the fund raised from the Dalian Yongli Subscription would immediately improve the net current liabilities position of the Company. Shareholders should be noted that the aforementioned analysis are for illustrative purpose only and does not purport to represent how the financial performance and financial position of the Company would be upon completion of the Dalian Yongli Subscription.

RECOMMENDATION

Having taken into consideration of the above factors and reasons, we are of the view and concur with the view of the management of the Company that the terms of the Dalian Yongli Subscription Agreement (as amended and supplemented by the Supplemental Agreements), the transactions contemplated thereunder and the grant of the Specific Mandate for allotment and issue of the Subscription Shares are on normal commercial terms, fair and reasonable so far as the Independent Shareholders are concerned and are in the interests of the Company and the Shareholders as a whole. Accordingly, we recommend (i) the Independent Board Committee to advise the Independent Shareholders; and (ii) the Independent Shareholders, to vote in favour of the relevant resolution(s) at the Meeting to approve the Dalian Yongli Subscription Agreement (as amended and supplemented by the Supplemental Agreements), the transactions contemplated thereunder and the grant of the Specific Mandate for allotment and issue of the Subscription Shares.

Yours faithfully, For and on behalf of Dakin Capital Limited Tam Kin Fong

Managing Director

Note: Mr. Tam Kin Fong is a responsible officer of Dakin Capital Limited, which is licensed to carry out Type 6 (advising on corporate finance) regulated activity under the SFO. He has been active in the field of corporate finance advisory for over 20 years, and has been involved in and completed various corporate finance advisory transactions.

SCHEDULE ‘‘C’’

GENERAL INFORMATION

1. RESPONSIBILITY STATEMENT

This Circular, for which the Directors collectively and individually accept full responsibility, includes particulars given in compliance with the Listing Rules for the purpose of giving information with regard to the Company. The Directors, having made all reasonable enquiries, confirm that to the best of their knowledge and belief, the information contained in this Circular is accurate and complete in all material respects and not misleading or deceptive, and there are no other matters the omission of which would make any statement herein or this Circular misleading.

2. DISCLOSURE OF INTERESTS

As at the Latest Practicable Date, the interests and short positions of the Directors and chief executive of the Company in the Common Shares, underlying Common Shares and debentures of the Company or its associated corporations (within the meaning of Part XV of the SFO) which (i) were required to be notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests and short positions in which they were taken or deemed to have under such provisions of the SFO), or (ii) were required, pursuant to section 352 of the SFO, to be entered in the register referred to therein, or (iii) which were required, pursuant to the Model Code for Securities Transactions by Directors of Listed Companies contained in the Listing Rules, to be notified to the Company and the Stock Exchange were as follows:

a. Interest in Common Shares of the Company

Name of Director Mr. Liu Yongtan (Note 1) Mr. Pingzai Wang (Note 2)	Capacity/Nature of interest Security interest, interest in controlled corporation and interest of spouse Interest in controlled corporation and interest of spouse Beneficial owner and interest of spouse	Number of Common Shares 181,194,306 23,600,000 2,093,167	Approximate percentage of issued share capital (%)
			50.07 6.52 0.58

Notes:

Jixing holds 23,600,000 Common Shares and is owned as to 100% by CCJGSA which is owned as to 66.70% and 33.30% by Mr. Liu and Ms. Zhang Lijun (Mr. Liu’s spouse), respectively. CCJGSA also has an interest in 181,194,306 Common Shares as security interests.

– C-2 –

Mr. Pingzai Wang holds a total of 1,500,000 stock options and 440,000 Common Shares of the Company. Ms. Li Wang holds 153,167 Shares. Ms. Li Wang is the spouse of Mr. Pingzai Wang. Accordingly, Mr. Pingzai Wang is deemed, or taken to be, interested in the Shares which Ms. Li Wang is interested in for the purposes of the SFO.

b. Interest in shares of the associated corporation of the Company

Name of Director Mr. Liu Yongtan (Note 1)	Name of associated corporation CCJGSA Jixing	Capacity/Nature of interest Security interest Beneficial owner	Long/Short position Long Long	Number of shares N/A N/A	Approximate percentage of shareholding (%)
					66.70% 66.70%

Note:

Jixing holds 23,600,000 Common Shares and is owned as to 100% by CCJGSA which is owned as to 66.70% and 33.30% by Mr. Liu and Ms. Zhang Lijun (‘‘Ms. Zhang’’) (Mr. Liu’s spouse), respectively. CCJGSA also has an interest in 181,194,306 Common Shares as security interests.

Save as disclosed above, as at the Latest Practicable Date, none of the Directors and the chief executive of the Company had any interest or short position in the Shares, underlying Shares or debentures of the Company or any associated corporation (within the meaning of Part XV of the SFO) which (i) were required to be notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests and short positions which they were taken or deemed to have under such provision of the SFO); or (ii) were required, pursuant to Section 352 of the SFO, to be entered in the register of the Company referred to therein; or (iii) were required, pursuant to the Model Code for Securities Transactions by Directors of Listed Companies set out in Appendix 10 to the Listing Rules, to be notified to the Company and the Stock Exchange.

3. INTERESTS OF SUBSTANTIAL SHAREHOLDERS

As at the Latest Practicable Date, so far as was known to the Directors and the chief executive of the Company, the persons (other than the Directors and chief executives of the Company) who had an interest or short position in the Shares or underlying Shares which would fall to be disclosed to the Company under the provisions of Divisions 2 and 3 of Part XV of the SFO, or who were recorded in the register required to be kept by the Company under section 336 of the SFO were as follows:

Name of substantial shareholders Aspen Investment Holdings Ltd. (‘‘Aspen’’) (Note 1)	Capacity/Nature of interest Beneficial owner	Number of Common Shares held 181,194,306	Approximate percentage of issued share capital (%)
			50.07%

– C-3 –

Name of substantial shareholders 吉林省弘原經貿集團有限公司(Ji Lin Hong Yuan Trade Group Limited) (‘‘JLHY’’) (Notes 1 and 2) 長春市麗源投資有限公司 (Changchun Liyuan Investment Co., Ltd.) (‘‘Liyuan’’) (Notes 1 and 3) 1648557 Alberta Ltd. (‘‘164 Co’’) (Notes 1 and 4) Le Bo (‘‘Mr. Bo’’) (Notes 4 and 5) Jing Hou (‘‘Ms. Hou’’) (Notes 4 and 5) Yuan Jing (‘‘Mr. Jing’’) (Note 1) Guang Jing (Note 6) Jixing (Note 7) CCJGSA (Note 7)	Capacity/Nature of interest Interest in controlled corporation Interest in controlled corporation Interest in controlled corporation Beneficial owner Interest of spouse Interest in controlled corporation Beneficial owner Interest of spouse Interest in controlled corporation Interest in controlled corporation Beneficial owner Security interest Interest in controlled corporation	Number of Common Shares held 181,194,306 181,194,306 181,194,306 440,000 3,804,540 181,194,306 3,804,540 440,000 181,194,306 181,194,306 23,600,000 181,194,306 23,600,000	Approximate percentage of issued share capital (%)
			50.07% 50.07% 50.07% 0.12% 1.05% 50.07% 1.05% 0.12% 50.07% 50.07% 6.52% 50.07% 6.52%

– C-4 –

Name of substantial shareholders Ms. Zhang Lijun (Notes 7 and 8) Dalian (Note 9) Zhang Zhong (Note 9)	Capacity/Nature of interest Security interest, interest in controlled corporation and interest of spouse Interest in controlled corporation and interest of spouse Beneficial owner Interest in controlled corporation	Number of Common Shares held 181,194,306 23,600,000 60,000,000 60,000,000	Approximate percentage of issued share capital (%)
			50.07% 6.52% 16.58% 16.58%

Notes:

Aspen holds 181,194,306 Common Shares and is owned as to approximately 41.09%, 39.69% and 19.22% by JLHY, 164 Co and Liyuan, respectively.
JLHY is held as to 60% by Mr. Jing and 40% by Guang Jing (Mr. Jing’s brother).
Liyuan is owned as to approximately 98%, 1% and 1% by JLHY, Zhou Li Mei and Jing Yue Li, respectively.
Mr. Bo holds 1,000 class D voting preferred shares in 164 Co, representing approximately 99.01% voting rights of 164 Co.
Ms. Hou holds 440,000 Common Shares and is one of the trustees of The Bo Family Trust. She is the spouse of Mr. Bo and is therefore deemed to be interested in all the Common Shares in which Mr. Bo is interested in under the SFO.
Guang Jing holds 40% of the equity interest in JLHY and is therefore deemed to be interested in all the Common Shares in which JLHY is interested in under the SFO.
Jixing is owned as to 100% by CCJGSA which is owned as to 66.70% and 33.30% by Mr. Liu and Ms. Zhang (Mr. Liu’s spouse), respectively. CCJGSA also has an interest in 181,194,306 shares as security interest. Ms. Zhang is the spouse of Mr. Liu.
Ms. Zhang is the spouse of Mr. Liu. Accordingly, Ms. Zhang is deemed, or taken to be, interested in the Shares which Mr. Liu is interested in for the purposes of the SFO.
Zhang Zhong holds 100% of the equity interest in Dalian and is therefore deemed to be interested in all the Common Shares in which Dalian is interested in under the SFO.
For identification purpose only

– C-5 –

Save as disclosed above, as at the Latest Practicable Date, the Directors and chief executives of the Company were not aware of any person (other than the Directors and chief executives of the Company) who had an interest or short position in the Shares or underlying Shares which would fall to be disclosed to the Company under the provisions of Divisions 2 and 3 of Part XV of the SFO, or who were recorded in the register required to be kept by the Company under section 336 of the SFO.

4. DIRECTORS’ SERVICE CONTRACTS

As at the Latest Practicable Date, there was no existing or proposed service contract between any of the Directors and the Company other than service contracts that are expiring or determinable by the employer within one year without payment of compensation (other than statutory compensation).

5. DIRECTORS’ INTERESTS IN ASSETS, CONTRACTS OR ARRANGEMENTS

As at the Latest Practicable Date, none of the Directors had any direct or indirect interests in any assets which have acquired or disposed of by or leased to, or were proposed to be acquired or disposed of by or leased to, the Company since December 31, 2020, being the date of which the latest published audited financial statements of the Company were made up.

As at the Latest Practicable Date, none of the Directors was materially interested in any contract, save for service contracts, or arrangement entered into by the Company which contract or arrangement was subsisting as at the Latest Practicable Date and which was significant in relation to the business of the Company.

6. DIRECTORS’ INTERESTS IN COMPETING BUSINESSES

As at the Latest Practicable Date, none of the Directors had interests in the businesses (other than those businesses where the Directors were appointed as directors to represent the interests of the Company) which are considered to compete or are likely to compete, either directly or indirectly, with the businesses of the Company.

7. QUALIFICATIONS AND CONSENT OF EXPERT

The following is the qualification of the expert who has given its opinions or advice which are contained in this Circular:

Name Qualification

Dakin Capital Limited a licensed corporation to carry out type 6 (advising on corporate finance) regulated activities under the SFO

As at the Latest Practicable Date, Dakin Capital Limited did not have any direct or indirect interest in any asset which had been acquired or disposed of by, or leased to, the Company, or was proposed to be acquired or disposed of by, or leased to the Company, since December 31, 2020, being the date to which the latest published audited financial statements of the Company were made

– C-6 –

up; and was not beneficially interested in the share capital of the Company and had any right (whether legally enforceable or not) to subscribe for or to nominate persons to subscribe for securities in the Company.

Dakin Capital Limited has given and has not withdrawn its written consent to the issue of this Circular with the inclusion of its letter and reference to its name in the form and context in which they respectively appear.

The letter and recommendation given by Dakin Capital Limited is given as of the date of this Circular for incorporation herein.

8. MATERIAL ADVERSE CHANGE

As at the Latest Practicable Date, the Directors were not aware of any material adverse change in the financial or trading position of the Company since December 31, 2020, being the date of which the latest published audited financial statements of the Company were made up.

9. LITIGATION

As at the Latest Practicable Date, the Company is not engaged in any litigation or arbitration of material importance and no litigation or claim of material importance is known to the Directors to be pending or threatened against the Company.

10. GENERAL

(1) The registered office of the Company is at 15th Floor, Bankers Court, 850-2nd Street SW, Calgary, Alberta T2P 0R8, Canada.
(2) The headquarters and principal place of business of the Company in Canada is at Suite 3600, 888-3rd Street SW Calgary, Alberta T2P 5C5 Canada.
(3) The principal place of business of the Company in Hong Kong is at Room 1901, 19/F Lee Garden One, 33 Hysan Avenue, Causeway Bay, Hong Kong.
(4) The branch share registrar and transfer office of the Company in Hong Kong is Computershare Hong Kong Investor Services Limited at Shops 1712–1716, 17th Floor, Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong.
(5) The joint company secretaries of the Company are Mr. Jesse Meidl, the Company’s chief financial officer and a Chartered Accountant with the Chartered Professional Accountants of Canada, and Ms. Chau Hing Ling, a fellow of The Chartered Governance Institute and the Hong Kong Institute of Chartered Secretaries.

– C-7 –

11. DOCUMENTS AVAILABLE FOR INSPECTION

Copies of the following documents will be available for inspection at the principal place of business of the Company in Hong Kong at Room 1901, 19/F Lee Garden One, 33 Hysan Avenue, Causeway Bay, Hong Kong during normal business hours (9:00 a.m. to 6:00 p.m.) from Monday to Friday (both days inclusive) from the date of this Circular up to and including the date of the Meeting:

(1) the amended and restated articles of incorporation and by-laws number two of the Company;
(2) the letter from the Board, the text of which is set out in this Circular;
(3) the letter from the Independent Board Committee to the Independent Shareholders, the text of which is set out in this Circular;
(4) the letter from the Independent Financial Adviser to the Independent Board Committee and the Independent Shareholders, the text of which is set out in this Circular;
(5) the consent letter as referred to in the paragraph headed ‘‘7. Qualifications and Consent of Expert’’ in this schedule;
(6) the Dalian Yongli Subscription Agreement and the Supplemental Agreements; and
(7) this Circular.

AI assistant

JX Energy Ltd. — Proxy Solicitation & Information Statement 2021

50836_rns_2021-09-17_277d0214-23de-4a58-9884-0ae73e4309b6.pdf

THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

PERSTA RESOURCES INC.

CONNECTED TRANSACTION PROPOSED ISSUE OF NEW SHARES TO CONNECTED PERSON UNDER SPECIFIC MANDATE

Special Meeting of Shareholders

Persta Resources Inc.

NOTICE OF SPECIAL MEETING

OF SHAREHOLDERS TO BE HELD ON OCTOBER 15, 2021 AT 9:00 A.M. (CALGARY TIME)/11:00 P.M. (HONG KONG TIME)

BY ORDER OF THE BOARD

LETTER FROM THE BOARD

PERSTA RESOURCES INC.

To: the Shareholders

(1) CONNECTED TRANSACTIONS IN RELATION TO THE ISSUE OF SHARES TO CONNECTED PERSON UNDER SPECIFIC MANDATE; AND (2) NOTICE OF SPECIAL MEETING

INTRODUCTION

DEFINITIONS

‘‘Trading Day(s)’’

PERSTA RESOURCES INC.

MANAGEMENT INFORMATION CIRCULAR AND PROXY STATEMENT

GENERAL PROXY MATTERS

Solicitation of Proxies by Management

Advice to Beneficial Holders of Common Shares

Revocation of Proxy

Persons Making the Solicitation

Exercise of Discretion by Proxyholders

Voting by Poll

Counting the Votes

VOTING SECURITIES AND PRINCIPAL HOLDERS OF VOTING SECURITIES

Voting Securities

Quorum

Principal Holders

Notes:

INTEREST OF CERTAIN PERSONS OR COMPANIES IN MATTERS TO BE ACTED UPON

SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS

INTEREST OF INFORMED PERSONS IN MATERIAL TRANSACTIONS

BACKGROUND TO THE SUBSCRIPTION

Date of the Dalian Yongli Subscription Agreement

Date of the First Amended and Restated Dalian Yongli Subscription Agreement

Date of the Second Amended and Restated Dalian Yongli Subscription Agreement

Parties

Subscription Shares

SUBSCRIPTION PRICE

Ranking of the Subscription Shares

Conditions of the Subscription

Completion of the Subscription

YEAR-TO-DATE COMMON SHARE TRADING DATA

Year-to-date daily trading volume and closing price per Common Share

APPLICATION FOR LISTING

INFORMATION CONCERNING THE COMPANY

REASONS FOR ENTERING INTO THE SUBSCRIPTION AGREEMENTS AND USE OF PROCEEDS

Use of proceeds

Reasons for entering into the Dalian Yongli Subscription Agreement

Contemplated transactions

FUNDRAISING ACTIVITIES OF THE COMPANY IN THE PAST TWELVE MONTHS

IMPLICATIONS OF THE LISTING RULES

EFFECT OF THE SUBSCRIPTION ON THE SHAREHOLDING STRUCTURE OF THE COMPANY

GENERAL

MATTERS TO BE CONSIDERED

1. Specific Mandate to Issue the Subscription Shares

‘‘BE IT HEREBY RESOLVED as an ordinary resolution that:

UNLESS DIRECTED OTHERWISE, THE MANAGEMENT DESIGNEES NAMED IN THE ACCOMPANYING INSTRUMENT OF PROXY INTEND TO VOTE FOR THE RESOLUTION APPROVING THE SPECIFIC MANDATE.

2. Other Matters

RECOMMENDATION

ADDITIONAL INFORMATION

BOARD OF DIRECTORS APPROVAL

BY ORDER OF THE BOARD

LETTER FROM THE INDEPENDENT BOARD COMMITTEE

Persta Resources Inc.

CONNECTED TRANSACTIONS IN RELATION TO THE ISSUE OF SHARES TO CONNECTED PERSON UNDER SPECIFIC MANDATE

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

CONNECTED TRANSACTION PROPOSED ISSUE OF NEW SHARES TO CONNECTED PERSON UNDER SPECIFIC MANDATE

INTRODUCTION

OUR INDEPENDENCE

BASIS OF OUR OPINION

PRINCIPAL FACTORS AND REASONS CONSIDERED

1. Background and financial information of the Company

Summary of the consolidated financial results and position of the Company

Annual results of the Company

Interim result of the Company

JX Energy Ltd. Proxy Solicitation & Information Statement 2021