Sunshine Oilsands Ltd.
HKSE : 2012

Sunshine Oilsands Ltd.

August 12, 2016 05:28 ET

Announcement of Results for the Second Quarter Ended June 30, 2016 and an Update on West Ells Progress

HONG KONG, CHINA and CALGARY, ALBERTA--(Marketwired - Aug. 12, 2016) - Sunshine Oilsands Ltd. is pleased to announce its financial results for the second quarter ended June 30, 2016 and an update on West Ells progress. Please see the attached announcement for further information.

Sunshine Oilsands Ltd. (the "Corporation" or "Sunshine") (HKEX:2012) today announced its financial results for the second quarter ended June 30, 2016. The Corporation's consolidated financial statements, notes to the consolidated financial statements and management's discussion and analysis have been filed on SEDAR (www.sedar.com) and with The Stock Exchange of Hong Kong Limited (the "Hong Kong Stock Exchange") (www.hkexnews.hk) and are available on the Corporation's website (www.sunshineoilsands.com). All figures used in this release are in Canadian dollars unless otherwise stated.

MESSAGE TO SHAREHOLDERS

During the three months ended June 30, 2016, the Corporation made progress in the following areas:

  • Currently, all eight West Ells Phase I well pairs are on steam injection, with five well pairs converted to production mode, the remaining three well pairs are expected to be on production in the month of August;
  • Although conversion from warm up to steam assisted gravity drainage (SAGD) production with down hole pump installation was delayed due to the Fort McMurray forest fire, three additional pump installations were completed by July 24, 2016; and
  • Bitumen peak production, prior to the Fort McMurray forest fire, was 450 barrels per day from well pair 12 and 150 barrels per day from well pair 5.

During the first few weeks of the second quarter, preparations for installation of down hole pumps on the remaining six well pairs were substantially completed. The installation schedule was delayed by the Fort McMurray forest fire situation. Fortunately, the West Ells SAGD facility never came under direct threat from the Fort McMurray forest fires as no fire came closer than 50km to the facility. West Ells continued to operate steaming activities normally from May 3, 2016, the date when the city of Fort McMurray was evacuated, until May 16, 2016, the date the Government of Alberta issued a Mandatory Evacuation Order to all facilities using the private AOSTRA road, including Sunshine's West Ells facility. The plant was shut down in accordance with standard operating procedures and all site personnel were evacuated. Site staff returned on June 8, 2016 after the Mandatory Evacuation Order was lifted. Normal steaming operations were re-established on June 21, 2016. No health, safety, or environmental incidents or spills occurred during the evacuation or restart and the resumption of normal operations took place with no issues.

Sunshine's Capital Raising Activities

The Company entered into a forbearance agreement with all of the Noteholders of the Notes (the "Noteholders") maturing on August 1, 2016. On August 11, 2016, the Company had entered into a further forbearance agreement (the "Second Forbearance Agreement") with all of Noteholders. Pursuant to the Second Forbearance Agreement, each of the Noteholders has agreed not to enforce its rights in respect of the Notes prior to 2:00 p.m. (New York time) on August 15, 2016, subject to certain restrictions, in order to provide the Corporation and the Noteholders with additional time to finalize definitive documentation effecting, among other things, entering into a term loan facility that extends the maturity date of the indebtedness owed to the Noteholders to August 1, 2017. There can be no assurance provided that the Notes will be extended as described above. Pursuant to the Second Forbearance Agreement, Sunshine has paid to the Noteholders all installment of interest due on the Notes on August 1, 2016 in the amount of US$10 million.

General mandate

Reference is made to the announcements of the Corporation dated March 16, 2016 (Hong Kong time) / March 15, 2016 (Calgary time), April 28, 2016 (Hong Kong time) / April 27, 2016 (Calgary time) and July 4, 2016 (Hong Kong time) / July 3, 2016 (Calgary time) (collectively, the "Bright Hope Announcements") in relation to the proposed issue of a total of 558,823,500 new Class "A" Common Voting Shares ("Common Shares") to Bright Hope Global Investments Limited ("Bright Hope Global") under the General Mandate (as defined in the Bright Hope Announcements).

On March 15, 2016, the Corporation entered into a subscription agreement with Bright Hope Global under which Bright Hope Global agreed to subscribe for a total of 558,823,500 Common Shares at a price of HK$0.34 per Common Share or approximately CDN$0.055 per Common Share, which in the aggregate amounts to gross proceeds of HK$190.0 million (approximately CDN$30.9 million) (the "Bright Hope Placement"). During the three months ended June 30, 2016, the Corporation issued an aggregate of 147,105,000 Common Shares under the Bright Hope Placement for aggregate gross proceeds of HK$50,015,700 (approximately CDN$8.2 million). An introduction fee of HK$1,000,314 (approximately CDN$0.2 million) has been paid in connection with the Bright Hope Placement.

The remaining 411,718,500 Common Shares subscribed for by Bright Hope Global (HK$140.0 million or CDN$23.1 million) are to be closed in one or more tranches with the last tranche closing no later than August 31, 2016. An announcement will be issued when the Corporation completes the closing of the remaining 411,718,500 Common Shares subscribed for by Bright Hope Global.

Specific mandate

Reference is made to the announcements of the Corporation dated June 1, 2015, July 28, 2015, August 21, 2015, October 1, 2015, November 2, 2015, December 6, 2015, March 2, 2016, May 3, 2016, June 3, 2016, June 23, 2016, July 21, 2016, August 1, 2016 and August 4, 2016 (all preceding dates are in Hong Kong time) and the circular of the Corporation dated June 22, 2015 (the "Circular"), in relation to, among other matters, the proposed issue of new Common Shares under the Specific Mandate (as defined in the Circular) and the connected transactions involving subscriptions for new Common Shares by connected persons.

During the three months ended June 30, 2016, the Corporation issued 53,333,333 Common Shares and subsequently issued 248,400,000 Common Shares subscribed by Prime Union Enterprises Limited ("Prime Union") under a subscription agreement between, amongst others, Prime Union and the Corporation dated May 31, 2015 (the "Prime Union Placement") for aggregate gross proceeds of HK$226,300,000 (approximately CDN38.0 million). Prime Union is a company directly wholly owned by Mr. Kwok Ping Sun who is a substantial shareholder and the Executive Chairman of the Corporation.

On May 2, 2016, the Board of Directors of Sunshine (the "Board"), having taken into account the current market conditions, consented to a further extension of the closing date for the remaining Common Shares issuable under the Prime Union Placement to August 2, 2016 from May 2, 2016.

Due to a delay in obtaining the remaining regulatory and currency control approvals necessary to transfer funds out of People's Republic of China to pay for the remaining Common Shares under the Prime Union Placement prior to August 2, 2016, Prime Union contacted the Corporation and, following discussion with respect to the relevant circumstances, requested a further extension to the closing date of the Prime Union Placement. On August 3, 2016, the Corporation announced that, after deliberating on the options available to the Corporation, the circumstances surrounding the regulatory delay, Prime Union's completion of a substantial portion of the subscription agreement to date, Prime Union's stated commitment to Sunshine to complete the subscription agreement as soon as possible and the Corporation's discussions with its professional advisors the Board determined that a further extension to the closing date of the Prime Union Placement is in the best interests of the Corporation and its shareholders. The remaining 111,786,667 Common Shares (HK$83.8 million or CDN$14.1 million) subscribed for by Prime Union are to be closed in one or more tranches with the last tranche closing no later than December 1, 2016. Prime Union has advised Sunshine that it has been working diligently to obtain the regulatory approvals but requires additional time due to the complexity of applicable regulatory requirements. Prime Union has also confirmed to Sunshine that it has the funds necessary to complete the subscription.

An announcement will be issued when the Corporation completes the closing of the remaining 111,786,667 Common Shares subscribed for by Prime Union.

Summary of Financial Figures

As at June 30, 2016 and December 31, 2015, the Corporation notes the following selected balance sheet figures:

(Canadian $000s) June 30,
2016
December 31,
2015
Cash $ 4,506 $ 6,545
Current restricted cash and cash equivalents - 14,389
Non-current restricted cash and cash equivalents - 8,119
Exploration and evaluation assets 292,427 290,945
Property, plant and equipment 670,178 650,930
Total liabilities 323,300 369,083
Shareholders' equity $ 595,286 604,098

For the second quarter of 2016, the Corporation had a net loss of $20.7 million compared to $19.1 million for the same period in 2015, representing a net loss per share of $0.00 for the 2016 period and $0.00 for the 2015 period.

2016 Outlook

As at the date of this release, all eight West Ells Phase I well pairs are on steam injection, with five well pairs converted to production. The Corporation is fully committed to advancing its corporate initiatives and expects to operate the plant to prove the reservoir performance.

Hong Luo

Chief Executive Officer

Dr. Qi Jiang

President & Chief Operating Officer

ABOUT SUNSHINE OILSANDS LTD.

The Corporation is a Calgary based public corporation, listed on the Hong Kong Stock Exchange since March 1, 2012. The Corporation was also listed on the Toronto Stock Exchange from November 16, 2012 to September 30, 2015, when it chose to voluntarily delist. The Corporation is focused on the development of its significant holdings of oil sands and heavy oil leases in the Athabasca oil sands region. The Corporation owns interests in oil sands and petroleum and natural gas leases in the Athabasca region of Alberta. The Corporation is currently focused on executing milestone undertakings in the West Ells project area. West Ells Phase 1 is operational and has an initial production target rate of 5,000 barrels per day.

FORWARD-LOOKING INFORMATION

This announcement contains forward-looking information relating to, among other things, (a) the future financial performance and objectives of Sunshine; (b) the closing of each of the Bright Hope Placement and the Prime Union Placement and the timing thereof; and (b) the plans and expectations of the Corporation. Such forward-looking information is subject to various risks, uncertainties and other factors. All statements other than statements and information of historical fact are forward-looking statements. The use of words such as "estimate", "forecast", "expect", "project", "plan", "target", "vision", "goal", "outlook", "may", "will", "should", "believe", "intend", "anticipate", "potential", and similar expressions are intended to identify forward-looking statements. Forward-looking statements are based on Sunshine's experience, current beliefs, assumptions, information and perception of historical trends available to Sunshine, and are subject to a variety of risks and uncertainties including, but not limited to, those associated with resource definition and expected reserves and contingent and prospective resources estimates, unanticipated costs and expenses, regulatory approval, fluctuating oil and gas prices, expected future production, the ability to access sufficient capital to finance future development and credit risks, changes in Alberta's regulatory framework, including changes to regulatory approval process and land-use designations, royalty, tax, environmental, greenhouse gas, carbon and other laws or regulations and the impact thereof and the costs associated with compliance. Although Sunshine believes that the expectations represented by such forward-looking statements are reasonable, there can be no assurance that such expectations will prove to be correct. Readers are cautioned that the assumptions and factors discussed in this announcement are not exhaustive and readers are not to place undue reliance on forward-looking statements as the Corporation's actual results may differ materially from those expressed or implied. Sunshine disclaims any intention or obligation to update or revise any forward-looking statements as a result of new information, future events or otherwise, subsequent to the date of this announcement, except as required under applicable securities legislation.
The forward-looking statements speak only as at the date of this announcement and are expressly qualified by these cautionary statements. Readers are cautioned that the foregoing lists are not exhaustive and are made as at the date hereof. For a full discussion of the Corporation's material risk factors, see the Corporation's annual information form for the year ended December 31, 2015 and risk factors described in other documents we file from time to time with securities regulatory authorities, all of which are available on the Hong Kong Stock Exchange at www.hkexnews.hk, on the SEDAR website at www.sedar.com or the Corporation's website at www.sunshineoilsands.com.

By Order of the Board of Sunshine Oilsands Ltd.

Sun Kwok Ping

Executive Chairman

Calgary, August 11, 2016

Hong Kong, August 12, 2016

As at the date of this announcement, the Board consists of Mr. Kwok Ping Sun, Mr. Hong Luo, Dr. Qi Jiang and Mr. Qiping Men as executive directors; Mr. Michael John Hibberd, Mr. Jianzhong Chen and Ms. Xijuan Jiang as non-executive directors; and Mr. Raymond Shengti Fong, Mr. Gerald Franklin Stevenson, Ms. Joanne Yan and Mr. Yi He as independent non-executive directors.

*For identification purposes only

Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong Limited take no responsibility for the contents of this announcement, 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 announcement.

This announcement appears for information purpose only and does not constitute an invitation or offer to acquire, purchase or subscribe for securities of Sunshine Oilsands Ltd.

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