AOGL.L Regulatory News (AOGL)

7.00am 27th June 2017

Mayan Energy Ltd / Index: AIM / Epic: MYN/ ISIN: VGG6622A1057 / Sector: Oil and Gas

Mayan Energy Ltd ("Mayan" or "the Company")

Subscription, Investment in Georgian Oil Company, Board Change and Share Issues

Mayan Energy Ltd (AIM: MYN), the AIM listed oil and gas company, is pleased to announce that it has raised £587,500 (before expenses) through a Subscription with institutional and private investors through a Brokered subscription (the "Subscription") of 195,833,333 new ordinary shares of no par value each (the "Subscription Shares") at a price of 0.3p per Subscription Share (the "Subscription Price"). The Company, at the same time, has agreed to invest £300,000 into Block Energy plc ("Block Energy"), a NEX listed oil and gas company with interests primarily in Georgia. The Subscription proceeds will be used to fund the investment in Block Energy and ongoing working capital for US operations.

Highlights

· Subscription to raise £587,500 (before expenses) at a price of 0.3p per share at a discount of 37.5% to the closing mid-market price on 26 June 2017.

· Issue of £180,000 of shares to creditors and advisors at the Subscription Price.

· Intention for Eddie Gonzalez, Mayan's CEO, to be issued 6,666,667 new Ordinary Shares on the same terms of the Subscription, following the publication of the Company's accounts for the year ended 31 December 2016; such shares to be issued in settlement of accrued salary owed to Eddie Gonzalez.

· Ross Warner to resign from the board immediately, Charlie Wood to become Non-executive Chairman. 

· The Subscription proceeds will allow Mayan to make an initial investment in an exciting new oil and gas opportunity at what the Company believes to be attractive terms, as well as provide additional working capital for the Group.

· Investment of £300,000 in Block Energy structured as follows:

o £90,000 equity investment via a placing of new shares at £0.07 per Block Energy Share which will result in Mayan acquiring a 1.68% equity interest in Block Energy

o £210,000 via a Secured Convertible Loan Note. 10% flat coupon with conversion to equity at a 10% discount to any price at which Block Energy's shares are listed or admitted to trading on any stock exchange other than NEX. 

· Block Energy is listed on the NEX Growth Market ("NEX") and is an exploration and production company focused on the acquisition of discovered oil fields in and around the Caucuses region, current primary focus being in the Republic of Georgia.

· Block Energy currently has a 38% interest (with rights to 100%) in the Norio Production Sharing Agreement ("PSA"). The Norio Production Sharing Contract has 118.7 MMbbl STOIIP, an estimated 400 km of 2D seismic and current production of around 20bbls/d which is expected to cover existing operational overheads.

· Block Energy also has an option to farm-in to the 4,722.5 sq km Block VIII licence, one of the largest oil and gas blocks in the Republic of Georgia; this has a current 36.9 million barrels risked resource estimate and a drill ready target.

· Schlumberger, one of the world's largest oilfield service companies, has recently completed an acquisition of the three Production Sharing Contracts ("PSC") in Georgia neighbouring Block VIII and the Norio PSA.

· Proceeds from the Mayan investment will be used to increase Block's interest in the Norio PSA, completion of a CPR and reserve report and preparation for an IPO.

Details of Investment

The Equity Subscription

The Company has agreed to make a £90,000 equity investment via a placing of shares at £0.07 thereby giving Mayan an 1.68% equity interest in Block Energy. Following the subscription, the Company will have the right to appoint a director to the board of Block Energy.

The Lending

The Company has also agreed terms to advance £210,000 by way of a secured convertible loan note instrument (the "Instrument") to fund the operation of Block Energy (the "Facility"). In accordance with the terms of the Instrument, the Facility will accrue interest at a rate of 10% per annum. The Facility has a long stop repayment date of 24 months after the date of the Instrument, but is repayable on written notice from the Company which may be issued no earlier than 12 months after the date of the Instrument. 

The Facility will automatically be converted into share capital in Block Energy at a discounted subscription price representing a 10% reduction from the IPO Price for the shares in Block Energy at the time of a Qualifying IPO (being defined in the Instrument as a listing with the Main List and also AIM). If a Qualifying IPO is not achieved within 12 months of the date of the Instrument, the Company may elect to convert the Facility into shares in Block Energy at a discounted subscription price representing a 10% reduction from the 30 day VWAP for Block Energy's shares on NEX.

The Facility will become immediately repayable upon an Event of Default (as defined in the Instrument) and is secured by a debenture (with fixed and floating charges) over Block Energy.

Block Energy

Block Energy also has an option to farm-in to the 4,722.5 sq km Block VIII licence, one of the largest oil and gas blocks in the Republic of Georgia, that has a current 36.9 million barrels risked resource estimate and a drill ready target, which hosts the prospective East Khavtiskhevi ("EK") onshore field. Block Energy has an option to farm-in to the licence and earn up to a 70% working interest in the field through the acquisition of seismic and drilling of an appraisal well.

The Norio Oil field licence is 21sq km and has produced over 2.0 million barrels of light sweet crude to date. It is located 35km from the centre of Tbilisi, and currently Block Energy is planning to execute a low capex recompletion programme of existing wells and drilling of new horizontal wells in the field to significantly increase existing production which is currently around 20 barrels of oil per day.

Block Energy's net assets as at 31 December 2016 were £81,446 and losses reported for the year ended 30 June 2016 were £110,774 although investors should note that these pre-date the investment by Block Energy in its Georgian assets, as announced on 11 April 2017. As at 23 June 2017 Block Energy had a market cap of £3.6million.

Norio

Norio is a 22.5 sq km onshore oil field drilled in the Soviet era that has produced 1.9MMbbl to date and which Schlumberger in a report dated March 2010 estimated contains 118.7 MMbbl STOIIP. There is extensive existing data available including 400km of 2D/3D seismic data. The PSA is valid until 2026 with optional five year renewal and there are no minimum work programme commitments. The current production is approximately 20bbls/d of light sweet oil from three wells drilled in the mid/late 1970s and is currently generating sufficient revenue to cover operational costs. The board intends to increase this production rate to over 250 bbls/d and move the company into free cash flow territory within six months of the planned work programme commencing. This will be achieved by cleaning up existing producing wells (cleaning/changing of pumps etc.) and re-completing further existing wells utilising modern drilling technologies, re-perforating and horizontal side tracks. Given the shallow depths of the target zones (approximately 1,000m) and proximity of the field to drilling equipment and transport facilities for oil sales, the Board expects its development plan to be efficiently rolled out to achieve a sharp increase in field production and revenue generation. To date, development of the Norio field has been hindered by the lack of capital and the recent global pricing environment of oil. Breakeven oil price on completion of the planned workovers, is believed to be sub $20 bbl.

Subscription Details, Issues of equity and Total Voting Rights ("TVR")

Issue of Shares to Creditors and Advisors

The Company has also agreed to issue 60,000,000 Ordinary Shares at the Placing Price in settlement of £180,000 in adviser fees and outstanding creditors ('Adviser Shares').

The Subscription

The Subscription is conditional on Admission and application will be made for the Subscription Shares and the Adviser Shares, which will rank pari passu with the existing Ordinary Shares, to be admitted to trading on AIM (the "Admission"). It is expected that Admission will become effective and dealings in the Subscription Shares will commence on or around 30 June 2017.

Following the issue of the 255,833,333 Subscription and Advisor Shares, the Company's issued share capital will consist of 338,694,909 Ordinary Shares of no par value with voting rights. No Ordinary Shares are held in treasury at the date of this announcement and therefore following the Admission, the total number of Ordinary Shares in the Company with voting right will be 338,694,909.

The above total voting rights figure may be used by shareholders as the denominator for the calculation by which they will determine if they are required to notify their interest in, or a change to their interest in the Company.

In addition, the Company advises that Eddie Gonzalez, Mayan's CEO, intends to subscribe for 6,666,667 new Ordinary Shares on the same terms of the Subscription, following the publication of the Company's accounts for the year ended 31 December 2016. A further announcement will be made once this is completed.

Warrants

In connection with the Placing, the Company has issued 25,433,333 warrants to its broker to subscribe for new shares in the Company exercisable within two years from admission of the Placing Shares at the Placing Price per share.

Commenting on the above Mayan's CEO Eddie Gonzalez said:  "The investment in Block Energy is an exciting step for the Company offering Mayan shareholders exposure to a highly accomplished management team, with a very attractive asset and potentially high impact development program. The value of this investment has the potential to dramatically increase over the coming year and I look forward to monitoring the progress of Block Energy in the future. The Board of Directors recognises the poor performance of the US business over the prior 12 months and continues to make determined progress toward resolving legacy problems as well as identify and implement value enhancing strategies going forward.

Regarding Shoats Creek and the LM13 Shallow Well, the Company continues to work on the well before perforation can be undertaken and will update investors as soon as this has been completed and the results from the planned perforation at the 710 foot level are known."

Proposed Board Change

The Company also announces that Ross Warner, Mayan's Chairman has notified the Company of his intention to leave the Board to pursue his other business interests. Charlie Wood will become non-executive Chairman, whilst a replacement for Ross Warner is being sought.

Special note concerning the Market Abuse Regulation

This announcement contains inside information for the purposes of Article 7 of the Market Abuse Regulation (EU) No 596/2014 ("MAR"). Market soundings, as defined in MAR, were taken in respect of the Subscription, with the result that certain persons became aware of inside information, as permitted by MAR. That inside information is set out in this announcement. Therefore, those persons that received inside information in a market sounding are no longer in possession of inside information relating to the Company and its securities.

**ENDS**

For further information visit www.Mayan energy.com or contact the following:

Notes:

Mayan Energy Limited is an AIM listed (London Stock Exchange) oil and gas energy company; whose present operations which are focussed on the redevelopment and enhancement of its upstream oil and gas interests in Oklahoma and Louisiana.