MTA.L Regulatory News (MTA)

22 January 2014

Matra Petroleum plc

("Matra" or the "Company")

Operational & Acquisition Update

Matra Petroleum plc (the "Company"), the oil and gas investing company, is pleased to announce the completion of Phase 2 of the Company's investment in the Texas Panhandle region of the USA and to provide an operational update.

Operational Update

The Company has established an office in Houston which is now fully operational. Through PG-M International, LLC ("PGM-JV"), the joint venture vehicle owned as to 50% by the Company, an experienced executive and operating team is being put in place including a chief operation officer, technical personnel, a geologist, a land manager and a financial controller.

PGM-JV has already made significant operational progress with the well workover programme with 33 wells re-opened, 18 of which are currently producing. PGM- JV has produced over 600 bbls of oil to date and the first oil sale of 184 barrels has been completed.

PGM-JV is also commissioning drilling contractors, subject to receipt of regulatory approvals, to commence further work now that Phase 2 has completed.

Completion of Phase 2Investment 

Matra's wholly owned subsidiary, Matra Petroleum U.S.A., Inc. ("Matra USA") has completed Phase 2 of the 3 phase acquisition of interests in certain oil and gas leasehold interests in the Texas Panhandle region of the USA through its investment in PGM-JV, a joint venture vehicle incorporated in Texas. The acquisition is made pursuant to a purchase agreement entered into, and announced by the Company, on 31 October 2013 (the "Purchase Agreement").

In the course of conducting extensive due diligence prior to closing of Phase 2, the Company discovered certain title defects. Set out below are further details regarding the title defects and how they have been addressed.

Maxim Barskiy, Chief Executive of Matra, commented:

"We are pleased to have completed Phase 2 of our acquisition in the Texas Panhandle region of the USA. In recent months we have started to see the full potential of the Texas asset which offers considerable upfront and future value for shareholders.

Over the last few months we have undertaken an extensive due diligence exercise on the lease titles the joint venture is acquiring. A minority proportion of the titles have been found to have defects but we are pleased to have reached agreement of how the defects will be resolved so that the value of these leases is safeguarded.

The completion of Phase 2 will allow us to further expand our operations, fully utilising the highly experienced team that is being put in place in Houston".

Terms of the acquisition

Under the Purchase Agreement, on 31 October 2013 Matra USA acquired a 50% interest in PGM-JV from PSOFEI, LLC for consideration of US$1.5 million (the "Phase 1 Investment"). In addition, under the Purchase Agreement, subject to the satisfaction of certain conditions (including a title defect procedure), Matra USA agreed to make further investments in connection with the transfer of additional assets to PGM-JV (such investments being the "Phase 2 Investment" and the "Phase 3 Investment") and has an option to acquire the 50% of PGM-JV that it does not already own. Further details of the Purchase Agreement, the Phase 1 Investment, the Phase 2 Investment and the Phase 3 Investment are contained in the Company's announcement dated 31 October 2013.

Completion of Phase 2 Investment

Under the Phase 2 Investment, Rifle Energy LLC and Vindex Holdings, LLC, each an affiliate of PSOFEI, LLC agreed to transfer to PGM-JV certain oil and gas leases comprising 5,759 net acres across the Texas Panhandle comprising Carson, Hutchinson and Moore counties. In consideration for such transfer, Matra USA agreed to pay to PSOFEI, LLC a total aggregate amount of up to US$9.2 million comprising up to US$3.85 million in cash and funding of up to US$5.35 million pursuant to a promissory note (on the terms as provided in the Purchase Agreement) secured by PSOFEI, LLC's 50% interest in PGM-JV. Completion of the Phase 2 Investment was subject to customary title review and closing conditions.

Title defects and Lease Maintenance Issues

In the event that title defects relating to the assets were identified during the title review and due diligence process, the Purchase Agreement contains a title defect procedure whereby defects may be addressed through the curing of such defects, the transfer of additional assets to compensate for such defects and/or a reduction in the consideration due. Following completion of the title review and due diligence process in relation to the assets: (a) held by PGM-JV at the time of the Phase 1 Investment; and (b) transferred to PGM-JV in connection with the Phase 2 Investment (the "Phase 1 and 2 Assets"), certain title defects were identified in relation to the Phase 1 and 2 Assets (the "Title Defects"). Certain lease maintenance issues were also identified in the review process.

The Company is pleased to announce that, following the application of the title defect procedure contained in the Purchase Agreement and agreements as to the lease maintenance issues, Matra USA has today entered into an agreement with the same parties to the Purchase Agreement pursuant to which the parties have agreed, among other things, which assets are affected by the Title Defects and how they are to be resolved.

At Phase 2 closing, PGM-JV is receiving 4,060 net acres not subject to any Title Defect or cure, and an additional 1,036 net acres subject to asserted Title Defects with sellers retaining the right to cure such Title Defects. Further, at the Phase 2 closing the sellers are retaining 663 net acres that are affected by asserted Title Defects but subject to cure. This acreage will be conveyed to PGM-JV if, as and when cured. Also, as to the Phase 1 Assets, the PGM-JV is retaining 140 net acres that are subject to cure.

As a result of the Title Defects and lease maintenance issues described above, it has been agreed that the consideration payable to PSOFEI, LLC at the Phase 2 closing is a total aggregate amount of approximately US$6.02 million comprised of approximately US$2.26 million in cash and funding of approximately US$3.76 million pursuant to a promissory note (on the terms as provided in the Purchase Agreement) secured by PSOFEI, LLC's 50% interest in PGM-JV. The amount of the consideration may be increased (but to an amount not exceeding the amount which was agreed in the Purchase Agreement and set out above) in the event that Title Defects and lease maintenance issues are cured during the relevant period.

Any Phase 1 and 2 Assets owned by PGM-JV affected by Title Defects which are not cured within the applicable cure period shall be assigned back to the sellers and any such assets retained by the sellers affected by Title Defects which are cured within the applicable cure period shall be assigned to PGM-JV.

Suspension to trading on AIM

The trading in the Company's ordinary shares continues to be temporarily suspended until such time as the Company publishes an admission document or the relevant transactions which would constitute a Reverse Takeover under AIM Rule 14 otherwise no longer proceed.

The Company anticipates the preparation of the admission document will commence shortly and it is expected that restoration of the Company's shares to trading on AIM will occur once the admission document is published.

For further information, please contact:

Matra Petroleum plc c/o Pelham Bell Pottinger

Henry Lerwill 020 7861 3169

Canaccord Genuity Limited

Henry Fitzgerald-O'Connor 0207 523 8000