Petro Matad Regulatory News (MATD)

8 May 2017

Petro Matad Limited

("Petro Matad" or the "Company")

Petro Matad secures an up to US$45.2 million investment to fund an ambitious work programme in 2017 and 2018

Highlights

· Investment of up to US$45,200,000 by way of a staged private placement and issuance of a convertible instrument allows Petro Matad to undertake an ambitious exploration work program in its 100% owned Block IV and V Production Sharing Contracts in West/Central Mongolia.

· Staged funding potentially minimises dilution to existing shareholders.

· Funding includes a number of protections for the Company.

· Flexible facility that can be terminated in the event that alternate funding sources are used to potentially expand the exploration programme over a longer timeframe.

· The Investor is a passive financial investor with no board participation rights.

Overview

The Company announces that it has entered into a share purchase and convertible securities deed (the "Agreement") with Bergen Global Opportunity Fund, LP (the "Investor"), an institutional investment fund managed by Bergen Asset Management, LLC, a New York asset management firm, in connection with a staged private placement of up to US$43,200,000 worth of new ordinary shares in the Company ("Shares") and a convertible instrument with a nominal value of US$2,000,000.

Under the Agreement, the Investor will subscribe for new Shares, in up to 15 tranches, in the amount of US$1,200,000 per approximately monthly tranche ("Tranche"). Any Tranche may be increased from US$1,200,000 to up to US$1,500,000 if the Company meets certain agreed metrics, and to up to US$3,000,000 by mutual consent of the Company and the Investor.

Additionally, following the extension of the PSC exploration periods for Blocks IV and V by the Mining Resources and Petroleum Authority of Mongolia to 29 July 2019 (or any later date), which is expected to occur shortly, the Investor will invest an additional US$2,000,000 in the Company, by way of a 24-month interest-free unsecured convertible instrument with a nominal value of US$2,000,000, which will be convertible, in whole or in part, into new Shares (the "Convertible").

The Company will make an announcement each time shares are issued in the approximately monthly share tranches, or the Convertible is issued or converted, under the Agreement, and will specify in such announcement the number of Shares issued or to be issued and their purchase (or conversion) price.

Applications will be made to the London Stock Exchange for any new Shares issued and allotted pursuant to the Agreement to be admitted to trading on AIM. It is expected that funding for the first Tranche will be received from the Investor shortly.

Use of Funds

The funds will be used to further advance the Company's previously announced two-well exploration programme by drilling additional basin opener wildcat wells to test the prospectivity of independent basins and to prove the existence of potentially commercial hydrocarbon accumulations; and by acquiring additional 3D seismic to de-risk prospects, or in case of discovery, to acquire appraisal 3D seismic data.

The firm programme for 2017 includes the drilling of two exploration wells, the first of which will be in Block V, followed by a well in Block IV. These wells are targeting prospects defined from the integrated interpretation of 2D seismic surveys acquired during several seismic campaigns since 2011, including infill seismic acquired in 2016 and airborne full tensor gradiometry data collected in 2015. 

A 3D seismic acquisition program over the Tugrug Basin in Block V will also be undertaken in 2017 to de-risk several prospects where a working petroleum system was previously documented by live-oil sampled from the TSC-1 corehole. The final location of the drilling targets for the 2018 drilling campaign will depend on the results of the 2017 drilling program and the 3D seismic acquisition program. The drilling rig will be winter stacked at location after the 2017 wells are completed, which will enable an early start on the second phase of drilling programme in spring 2018. News releases on the specific wells to be drilled in 2017 will be issued prior to commencement of drilling operations.

Key Company Protections

The Agreement incorporates substantial safeguards for the Company, including the following:

· The Company is not required to undertake all the Tranches in that it may terminate the Agreement at its discretion without proceeding with all the Tranches otherwise agreed under the Agreement. This ensures that the Company can avoid dilution at below a level that is acceptable to it, or if a more advantageous funding option becomes available to it, or if the funding is no longer required all together.

· At the same time, given the Investor's commitment under the Agreement, the investment provides the Company with certainty of access to funding over the next 15 months.

· Under the Agreement, the Investor has agreed not to, and to cause its affiliates not to, short sell Shares.

· To the extent that the Investor exits its investment, the Agreement imposes strict contractual limits on the Investor's ability to sell the Shares it owns, intended to ensure that if the Investor elects to exit its position it does not represent an unduly large proportion of the market when reducing its position.

Any issuance of new Shares to the Investor shall be subject to the resultant total interests of the Investor, together with any persons "acting in concert" with the Investor, not being in aggregate 30% or more of the enlarged issued share capital of the Company following such issuance.

Issuance and Conversion Pricing

· The issuance price of the new Shares in each Tranche or in a conversion of the Convertible will be determined (at the Investor's election) at (a) 90% of the average of five daily volume-weighted average prices of the Shares on AIM ("VWAPs") during the 20 trading days preceding the date of the issuance of the shares, or (b) an issuance price which is at a 35% premium to the average of the VWAPs of the Shares for the 20 trading day period before the execution of the Agreement; save that the latter price may not apply in relation to more than two Tranches.

· This allows the Company to potentially issue new Shares at prices that are linked to the prices prevailing at the time of the issuance (i.e. potentially at a premium to the current share price) and if the price appreciates (e.g. if the Company achieves positive operational catalysts from its drilling programme and other activities, by utilizing this funding) minimise the dilution for its shareholders.

· All pricing to be calculated under the Agreement shall be rounded down to the nearest whole penny.

Alternate funding

Petro Matad believes it is prudent to secure this funding in advance of entering into a rig contract and also, to ensure that the Company is fully funded for its firm 2017/18 drilling and seismic work commitments. The Company continues to assess options for industry funding for its activities. To this end Petro Matad is in discussions with a number of parties, who are seeking to farm-in to the Company's licences. The aim remains to secure a financially robust industry partner to share the costs and risks of the drilling programme and also, to bring in such a partner in 2017.

Other terms and application for new Shares

The Investor has been granted 3.9 million warrants (each exercisable into one new Share) with a term of three years at an exercise price of £0.4219 (which is at a 35% premium to the average of the VWAPs of the Shares for the five-trading day period before the execution of the Agreement). If the Company raises funds in the future (excluding funds raised under the Agreement and certain other types of fundraises) at prices that are lower than the exercise price of the warrants, the exercise price of the warrants will be adjusted to such third party fund-raising price.

Under the Agreement:

· the Company will pay the Investor a commencement fee of US$632,000 to be satisfied by way of the issue of 2,151,951 new Shares; and

· the Company has agreed to issue to the Investor 3,500,000 new Shares at par (US$0.01 per Share), by way of security for the performance of the Company's obligations under the Agreement.

The Company has applied for admission of the 5,651,951 new Shares to trading on AIM, and this is expected to become effective on or about 11 May 2017 ("Admission"). Following Admission, Petro Matad will have 293,576,226 ordinary shares in issue, which will also represent the total number of voting rights in the Company. No Shares are held in Treasury. This figure should be used by shareholders as the denominator for the calculations by which they will determine if they are required to notify their interest in, or a change to their interest in, the Company under the FCA's Disclosure Guidance and Transparency Rules.

The Investor may be required to make a further payment to the Company in relation to such collateral shares once all of the obligations of the Company under the Agreement have been finally met and no amount remains outstanding to the Investor, depending on the price of Shares at such time.

The Convertible and any new Shares pursuant to the Agreement will only be issued to the extent that the Company has corporate authority to do so.

Ridvan Karpuz, CEO of Petro Matad, said:

"We are delighted to have reached agreement with Bergen Global Opportunity Fund to provide between US$20 million and US$45 million of funding for Petro Matad. This funding secures our firm work programme for 2017 and 2018 comprising 4 exploration wells and up to 300 km2 of 3D seismic acquisition. The Bergen facility is extremely flexible and allows us to effectively manage our cash resources over the next 18 months during a very active operational period for the Company.

We will continue to pursue other investment options that could allow us to either expand our work programme in the event of encouragement with the drilling programme, or alternately reduce the funding required from the Bergen facility. In particular, we are in active dialogue with a number of interested parties who are evaluating the farm-out and remain hopeful of concluding an agreement with a farminee prior to the commencement of the first well."

About Bergen Asset Management, LLC

Based in New York, Bergen Asset Management, LLC is an institutional investor with a particular focus on direct investments in small-cap companies around the world, and a track record of success.

About Petro Matad

Petro Matad is the parent company of a group focussed on oil exploration, as well as future development and production in Mongolia. At the current time, Petro Matad holds the sole operatorship of three Production Sharing Contracts with the Government of Mongolia. Block XX has an area of 10,340 km² in the far eastern part of the country, and Blocks IV and V have an area of 28,900 km2 and 21,100 km2, respectively, in the southwest part of the country.

Petro Matad Limited is incorporated in the Isle of Man under company number 1483V. Its registered office is at Victory House, Prospect Hill, Douglas, Isle of Man, IM1 1EQ.

This announcement contains inside information which is disclosed in accordance with the Market Abuse Regulation (EU) No 596/2014 ("MAR").

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