AOGL.L Regulatory News (AOGL)

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

29 January 2019

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

Update and Equity Raise

Mayan Energy Ltd (AIM: MYN), the AIM listed oil and gas company, is pleased to provide an update with regards to its asset rationalisation programme, corporate reorganisation and a raising of additional capital to execute its development plans. This is the result of the now concluded operational review as originally announced on 9 October 2018. 

· Gross cash proceeds of £750,000 raised at a price of 0.12p per share (the "Placing") and £223,069 

being 185,890,442 shares issued in settlement of accrued directors fees, consulting fees, settlement of accrued liabilities and an amended agreement with Smart Bit LLC;

o Directors participated in the Placing to the extent of £70,000 cash subscription and a further £96,640 in accrued Directors' fees and legal advisor fees settled by the issue of shares at the Placing Price

· Independent review of the portfolio has resulted in consolidation of asset base and focussing of activities where the Board and advisors believe allocation of cash is optimal

· Stockdale and Austin Chalk (to be known as the Austin Field) and Zink Ranch, identified as the core assets with Forest Hills classed as non-core - Mayan to seek exit (a full table of wells is provided below)

· Austin Field, Texas - 7 well package set over 1,368 acres

o Re-negotiated increase in interests (at no additional cost) at Austin Field as follows:

§ Morris 1 well increased to 100% from 60% working interest

§ Acquired additional well, Montsanko with 100% working interest

§ Increase in working interest to 100% from 60% on all five (Austin Chalk) wells with 5-10% gross overriding royalties payable to Smart Bit LLC

o Austin Field potentially having prospectivity in other zones and possibly across the Eagle Ford Shale formation, subject to acquisition of rights, with plans to reinterpret historical geological data and appraise the additional potential over H1 2019

o Attis Operating I Inc. ('Attis') appointed to operate the Austin Field with initial re-start of operations and production on 5 of 7 wells commencing during February

· Zink Ranch, Prue Oilfield, Oklahoma - 50 historic wells, 18 active wells, two tank batteries and one gas sales point:

o Memorandum of Understanding ('MOU') with Red Bensh Fork Energy LLC ('RBFE') to engage its contract operator Iron Hawk Energy Group JV ('Iron Hawk') to manage and operate Zink Ranch Field. 

o MOU also provides non-binding initial framework for RBFE to farm into Zink Ranch and Mayan to farm into Red Fork field in Oklahoma on terms to be agreed following an approximately 90 day due diligence period.

o Iron Hawk, once approved as operator, will initially seek to enhance existing Zink Ranch c.6-8 bopd production through basic field management techniques with limited capital requirements from Mayan

o Notice of mutual agreement to terminate operator agreement sent to Derrick Oilfield Services Inc and the previous shares issued as consideration for operations work of 11.1 million shares will be returned and cancelled in due course

· Technical Advisory Committee ('TAC') established to enhance the Company's technical capacity

Paolo Amoruso, Chairman of Mayan, said, "Following the departure of Mr. Gonzalez in September, the Board committed to a review of the Company to rationalise Mayan's financial resources, prioritise investment in those assets which offer the most attractive returns on a risk / reward basis, re-commence production at the earliest opportunity, and to build a solid foundation from which to grow Mayan in 2019. To this end I believe we have made significant progress.

"Following the asset review conducted by Attis, the Company has elected to focus operations on two main areas: The Austin Field (formally Stockdale and Austin Chalk) and Zink Ranch. On the lease formally known as Stockdale, the working interest in the Morris 1 well was increased to 100% and an additional production well, Montsanko 1, and Salt Water Disposal, Montgomery SWD, was obtained, while we have completed the purchase and increased the interest in the five wells that formerly comprised Austin Chalk - both of the deals were renegotiated at no additional cost to Mayan. Additionally, it was also decided that the Forest Hills wells do not complement our current operations and we're now evaluating our options going forward. 

"Operationally, all employees of Mayan were terminated and day to day field operations have or will be transferred to Attis and Iron Hawk, both qualified, experienced oil and gas contract operators. An independent Technical Advisory Committee ('TAC') reporting to the Board staffed by the respective CEOs of the new operators and an experienced landman in Texas has also been established. The enhancement of Mayan's technical capabilities cannot be understated, and it is important to the Board that the Company's future is characterised by rigorous financial controls and adherence to transparent codes of governance. 

"On the corporate side, Sarah Cope was brought in as a Non-Executive Director in the UK to chair the corporate governance committee and it has been decided that the composition of the Board, as well as the review of Mr. Wood's position as CEO, will be reviewed once the operational and financial steps outlined herein are implemented. 

"On a financial level, we settled numerous claims against the Company and the Company is currently in the process of filing past tax returns and will be looking to settle amounts due with the US Internal Revenue Service shortly. We are obviously delighted to have raised additional capital and we thank shareholders for their support. We hope the contribution by the directors is a positive signal to the market.

"It has been a challenging period for Mayan, but in less than 4 months, we have made great strides in identifying, isolating and streamlining operations while reducing our monthly cash burn significantly. Once our current operations are restarted, we will look to develop and grow from a sound asset base, characterised by rigorous financial controls, governance, and clear development plans for existing and future projects."

Portfolio reorganisation - Focusing operations on two core assets: Austin Field and Zink Ranch:

Following the recent completion of the independent operational and corporate review conducted by Attis Operating Inc. ('Attis'), the Company is pleased to provide an update on the ongoing reorganisation of its US onshore oil and gas asset base.

Austin Field, Texas (previously known as Stockdale and Austin Chalk) - 8 well package in South East Texas

Given the proximity of the two fields, the Board has decided that the Stockdale and Austin Chalk interests will be forthwith considered as a single field known as the "Austin Field". To consolidate its interests, the Company has increased its working interest ('WI') in the Morris #1 well to 100% from 60% and has acquired a 100% WI in an additional production well (Montsanko #1), and salt water disposal well (Montgomery SWD) and tank battery as part of the new Austin Field well package. Additionally, it has increased its WI to 100% from 60% in Edwards, Neubauer Stanush, Kosub, Ritchie-Talley and Garrison wells (formally the Austin Chalk 5 well package), achieved via a revised sale & purchase agreement with Smart Bit LLC., the original vendor of the Austin Chalk wells. 

Mayan has entered into a Contract Operating Agreement and Joint Operating Agreement with associated accounting provisions in accordance with the Association of Petroleum Landmen Model JOA with Attis Operating I Inc ('Attis') to operate the Austin Field and undertake a seven-well development package. As mentioned previously, Attis is an experienced US oil & gas operator based in Texas and the UK. It has successfully developed a dedicated and dynamic on ground team and currently owns and operates 100 oil and gas wells as well as managing compliance, testing and accounting for a further 500 wells in Texas.

In February 2019, Attis will mobilise equipment and personnel to the Austin Field in order to begin to test fluid flow and origin, service and/or replace downhole equipment, service topside equipment, and, revitalise production at the Montsanko #1 and Morris #1 wells.

The newly acquired Montsanko #1 well is understood to be a high fluid volume production well. Our plan is to conduct a production test, analyse the oil/water entry ratio and replace the existing electric pump with a pump-jack. Its our belief that this should increase production efficiency whilst still allowing the integration of existing infrastructure. 

We plan to conduct testing and rework on the Morris #1 well, including integrity testing and likely replacing the downhole pump. The Morris #1 well has production separation units and fluid storage tanks available.

Mayan has additionally acquired, at no cost, the recently reworked Montgomery SWD well and tank battery. Recent review and appraisal of the infrastructure demonstrated that, subject to minor service work, it is fit-for-purpose to undertake the testing and rework scope. Attis intends to integrate fluid storage and water disposal for both Morris #1 and Montsanko #1 to the Montgomery SWD and tank battery. 

Following completion of the work-overs at Morris #1 and Montsanko #1 it is proposed that Attis will mobilise equipment to the Edwards, Garrison and Ritchie-Talley (previously wells within the Austin Chalk well package). Again, the purpose of the operation will be to test fluid flow and origin, service and/or replace downhole equipment, service topside equipment, and, return the wells to production.

Mayan has agreed to a second amended and restated sale and purchase Agreement (the 'Agreement') with Smart Bit LLC ('Smart Bit'). This updated the original agreement with Smart Bit as announced on 23 August 2018. Under the terms of the Agreement Smart Bit has agreed to sell Mayan a 100% WI and retain a 10% gross overriding royalty interest in the following wells at Austin Field: Edwards, Neubauer Stanush, Kosub, Ritchie Talley and a 5% gross overriding royalty at the Garrison well. 

The consideration for the revised agreement is as follows:

1. US$170,000 cash already paid by Mayan Energy

2. 48,614,725 shares in Mayan Energy Ltd

a. 25,274,725 shares previously issued 0.7p

b. 23,340,000 further shares issued at 0.2p

Total consideration under the revised deal on the effective date of the transaction is approximately US$375,000.

Following the Agreement Mayan will hold the following Working Interests and Net Revenue Interest in each of the five wells.

*Smart Bit has encountered difficulties in tracking all of the historic owners of the Garrison Unit and the Board is conservatively estimating a NRI of 50% after the ORRI to Smart Bit, but will continue the due diligence going forward.

Zink Ranch, Prue Oilfield, Oklahoma - 50 historic wells, 18 active wells, two tank batteries and one gas sales point

Independent reviews of Zink Ranch, undertaken by Attis, highlighted the excellent condition of the property and its potential for expanded production beyond its current levels of circa 6-8 bopd.

To maximise this potential, a Memorandum of Understanding has been signed with Red Bensh Fork Energy LLC ('RBFE') to use its contract operator Iron Hawk Energy Group JV ('Iron Hawk') to manage and operate Zink Ranch for Mayan. Iron Hawk currently operates approximately 60 producing wells on 40,000 acres in Oklahoma and is owned by a successful oil and gas operating team with substantial experience in the area including Rob Bensh who has agreed to sit on the Company's Technical Advisory Committee. RBFE's asset base and operational knowledge of the geology and the area, create the potential for a future development/farm-out partner and has opened the door for exploring additional joint venture opportunities in Oklahoma. Indeed, the MOU with Iron Hawk states that the companies are to explore opportunities in good faith regarding a farmout of Mayan's interest in Zink Ranch to Iron Hawk and for Mayan to farm into the Red Fork field, subject to the agreement of terms and customary due diligence. Once operations have resumed, the Company will provide an update on its development plans for Zink Ranch.

Additionally, Mayan agreed to settle its differences with its prior operator, Glenn Supply, and is in the process of transferring the interest to Mayan's Oklahoma operating subsidiary and operatorship to Iron Hawk. Iron Hawk and Mayan have agreed to execute a Joint Operating Agreement pursuant to the AAPL Model JOA and Accounting Procedures. The Board believes that as soon as the Bureau of Indian Affairs ("BIA") is completed, operations on the assets will be ready to resume. Subject to the absence of unexpected delays, the Company anticipates development of Zink Ranch to commence in H1 2019.

In regard to the Derick Oilfield Services Inc. ('Derick') services agreement, a termination of services notice for non-performance was sent to Derick and they agreed to the return to the Company and cancelling of all previously issued shares (11.1 million ordinary shares).

Forest Hill, Texas

The Rail Road Commission (RRC) hearing was held before a district court Judge in November 2018 with a follow up hearing set for February 2019. The Judge encouraged the parties to seek a negotiated settlement, with negotiations currently ongoing between Mayan's joint venture partner and the third-party group bringing the claim. The assets are considered non-complementary to Mayan's current assets and negotiations are underway to sell them.

Aminex Settlement

The Company has agreed a full and final settlement of Current Obligations to Aminex Plc Arising from the Purchase of Shoats Creek Properties from Aminex USA Inc.

1. Cash payment of $US50,000.00 .

2. Issue of US$100,000 (£76,046) in Mayan ordinary shares (part of the 'Settlement Shares") issued at placing the price of 0.12p

a. 31,685,678 tradable immediately

b. 31,685,678 Mayan subject to 3 months lockup from 29 January 2019

Advisor Agreement Settlement

Furthermore, the Company has agreed to pay agreed fees in shares to a consultant on the following basis. 

1. 10,000,000 (issued at 0.166p) shares on completion of the placing.

2. 10,000,000 share 15 March 2019.

3. 10,000,000 shares on 15 May 2019.

Asset Summary:

The Company has determined to concentrate on the assets which it considers will represent the best opportunities for return value to Shareholders, being:

*Subject to BIA process the transfer 100% interest across to Mayan Energy subsidiary (currently 85% held on behalf of Mayan with balance 15% held by Glenn Supply).

Accordingly, the following assets are considered non-core:

Technical Advisory/ Operational Oversight Committee:

Mayan has established a Technical Advisory Committee reporting to the Board of Directors to advise on the development and implementation of upcoming work programmes and budgets, review acquisitions, divestures and business development opportunities. The Committee will provide the first level of review prior to making recommendations to the Board. 

The committee currently consists of Mr Thom Board, CEO of Attis Oil & Gas Inc., the parent of Attis Operating I Inc. that have been appointed operator at Austin; Robert Bensh, CEO of Iron Hawk Energy, the operator appointed at Zink Ranch; and, Mr Cutter Brewer, an experienced Texas based landman.

Petroteq Energy:

Using its patented environmentally friendly heavy oil sands processing and extraction technology, Petroteq is developing the Asphalt Ridge heavy oil sands project, Utah, which was successfully commissioned in Q2 2018. Production at Asphalt Ridge, which holds contingent resources of 93.4 million barrels, is currently being ramped up towards an initial rate of 1,000 bopd as part of its stage one development. Petroteq's patented protected technology utilises a modular and small footprint/capex, allowing Petroteq to extract over 99% of all hydrocarbons without the need for high temperatures or pressures whilst using no water and generating no greenhouse gases. The Board believes that the depressed price in Petroteq is not reflective of its value and will continue to monitor the situation in the future.

The Company currently holds 1,035,233 shares in Petroteq Energy Inc. with associated 3-year warrants at USD $0.90.

Placing Details:

Additionally, the Company announces that it has raised £750,000 via a placing of 624,999,996 new ordinary shares of no par value in the capital of the Company (the "Ordinary Shares") (the "Placing Shares") with certain existing and new investors and Directors of the Company at a price of 0.12p per share (the "Placing"). 

Additionally, 185,890,442 Ordinary Shares will be issued in relation to the settlement of accrued liabilities, legal advisor fees, revised deal completion payments, and outstanding Director fees ("the Settlement Shares").

The Placing is conditional on Admission and application will be made for the Placing 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 Placing & Settlement Shares will commence on or around 13 February 2019. 

The funds raised by the Placing will be used for the settlement of the anticipated IRS liabilities, operational creditors and the upcoming development of Austin & Zink Ranch and general working capital.

 Broker Warrants

In connection with the Placing, Mayan has issued 42,124,997 broker warrants to subscribe for new shares in Mayan , and these are exercisable at the Placing Price within three years from admission of the Placing Shares.

Director Participation

Certain of the Directors are participating in the Placing by way of a subscription for a total of 58,333,332 Placing Shares and are also being issued with 80,533,253 Settlement Shares in lieu of accrued Director's salaries and legal advisor fees. Details of these subscriptions and subsequent beneficial holdings as a result of the Placing are shown below:

The subscription by certain of the Directors for Placing Shares pursuant to the Placing along with the issue to them of certain of the Settlement Shares (as set out above), constitutes a related party transaction under the AIM Rules for Companies (the "Transaction"). The independent Director for the purposes of the Transaction, being Sarah Cope, having consulted with Beaumont Cornish (the Company's nominated adviser), considers that the terms of the Transaction are fair and reasonable in so far as the Company's existing shareholders are concerned.

Total Voting Rights ("TVR"):

Following the issue of the Ordinary Shares (being Placing Shares and Settlement Shares), the Company's issued share capital will consist of 2,273,837,381 Ordinary Shares 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 rights will be 2,273,837,381.

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.

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.mayanenergy.co.uk or contact the following:

Notes:

Mayan Energy Limited is an AIM listed (London Stock Exchange) North American based energy company. It is actively pursuing a primary recovery oil strategy focused on re-stimulating wells within mature producing basins with immediate cash flow leveraging commercially available technologies and projects that are shallow, low risk with low levels of capex and infrastructure already in place. It also remains interested in creating shareholder value by strategic investments in similar projects with high cash generative potential and by forming beneficial development partnerships that enable the use of pioneering and leading extraction technologies.

Technical sign off

All of the technical information, including information in relation to reserves and resources that is contained in this announcement has been reviewed by, Mr Thom Board. Mr Board is a member of the Society of Petroleum Engineers who is a suitably qualified person with over 24 years' experience operating and developing oil and gas assets. Mr Board has reviewed the release and consents to the inclusion of the technical information.