Greenfields Petroleum Corporation
TSX VENTURE : GNF
TSX VENTURE : GNF.DB

Greenfields Petroleum Corporation

March 08, 2016 08:00 ET

Greenfields Petroleum Corporation Announces Execution of Agreement to Consolidate Interest in Bahar Energy Limited and Restructuring Transaction

HOUSTON, TEXAS--(Marketwired - March 8, 2016) - Greenfields Petroleum Corporation (the "Company" or "Greenfields") (TSX VENTURE:GNF)(TSX VENTURE:GNF.DB) is pleased to announce that it, through its wholly-owned subsidiary, Greenfields Petroleum International Company Ltd. ("GPIC"), has entered into a share purchase agreement with Baghlan Group Limited (in liquidation) (acting by its liquidator, John Ayres, as agent and without personal liability) ("Baghlan") and its liquidator as agent for and on behalf of Baghlan (the "Liquidator"), pursuant to which, GPIC has agreed to purchase Baghlan's 2/3 interest (the "Interest") in Bahar Energy Limited ("BEL") and Baghlan's interest in a shareholder loan receivable due from BEL to Baghlan (the "Acquisition"). BEL is a company incorporated in Dubai and is currently the sole shareholder of Bahar Energy Operating Company Limited ("BEOC"), the operating entity of the Company's project in Azerbaijan (the "Project"). The aggregate consideration payable by GPIC for the Acquisition includes a cash payment of USD$6.0 million, and a release and discharge of liabilities, claims and demands in relation to certain default loan amounts and any and all other obligations, liabilities, claims or demands of any kind owed to BEL, BEOC and/or Greenfields by Baghlan (the "Default Obligations"). Greenfields estimates the Default Obligations to be an aggregate of USD$57.6 million. Upon completion of the Acquisition, BEL will become a wholly-owned subsidiary of the Company. USD$6.0 million has been placed into escrow pending satisfaction of certain conditions to the completion of the Acquisition. Greenfields anticipates closing of the Acquisition to occur within 3 months of the date of this news release. Completion of the Acquisition is subject to certain closing conditions, including, without limitation, receipt of the approval of the TSX Venture Exchange (the "TSXV") and other necessary regulatory approvals.

In order to fund the Acquisition, the Company has agreed to restructure its debt and, in that regard, has signed a fifth amending agreement (the "Fifth Amending Agreement") to the loan agreement dated November 25, 2013 (the "Loan Agreement") with its senior lenders (the "Senior Lenders"). The Fifth Amending Agreement provides for, among other things: (i) additional funding in the aggregate amount of USD$7.0 million to satisfy the purchase price in respect of the Acquisition and for working capital purposes; and (ii) an extension of the maturity date under the Loan Agreement from February 29, 2016 to May 16, 2016 in order to facilitate the completion of the Restructuring Transaction described below.

In consideration of the Senior Lenders entering into the Fifth Amending Agreement, the Company has agreed to: (i) obtain the approval of holders ("Debentureholders") of the 9.00% convertible unsecured subordinated debentures due May 31, 2017 (the "Debentures") for the conversion (the "Debenture Conversion") of the CAD$23,725,000 aggregate principal amount of Debentures into an aggregate of approximately 33.2 million common shares in the capital of the Company ("Common Shares"); (ii) issue, in connection with the completion of the restructuring, up to an aggregate of 2,394,000 Common Shares for every USD$1,000,000 of principal due to the Senior Lenders under the Loan Agreement; and (iii) issue, in connection with the completion of the restructuring, an equivalent number of Common Share purchase warrants ("Warrants") to the Senior Lenders (collectively, the "Restructuring Transaction"). Contemporaneous with the completion of the Restructuring Transaction, the Company anticipates a sixth amendment agreement will be signed extending the maturity date under the Loan Agreement to December 31, 2017.

The Warrants will have the following terms: (i) each Warrant shall entitle the Senior Lenders to purchase a Common Share at an exercise price of $0.375 per Common Share; (ii) Warrants will only vest in the event of a dilutive issuance of securities by Greenfields and only as to such number of Warrants as are necessary to maintain each of the Senior Lenders' equity position in Greenfields; (iii) all rights to unvested Warrants will terminate upon the earlier of: (A) the maturity date under the Loan Agreement, being December 31, 2017; or (B) the date on which all amounts owing under the Loan Agreement are repaid in full; and (iv) all vested Warrants may be exercised at any time, and from time to time, for a period of five years from the date of their issuance.

The Debenture Conversion will be implemented upon the approval of the Debentureholders, by way of extraordinary resolution, pursuant to and in accordance with the terms of the indenture governing the Debentures. Greenfields expects to hold a meeting of Debentureholders ("Debentureholder Meeting") to consider the conversion of Debentures promptly upon completion of the Acquisition. The Company will provide further particulars of the Debentureholder Meeting and the Shareholder Meeting in a separate news release once such particulars are available. The extraordinary resolution approving the Debenture Conversion must be passed by 66 2/3% of the Debentures present in person or by proxy and voting on the resolution.

The Common Shares to be issued to the senior lenders pursuant to the Fifth Amending Agreement will result in: (i) the Company's issued and outstanding capital exceeding its authorized share capital as set forth in the Company's amended and restated memorandum and articles of association; and (ii) the Senior Lender owning, directly or indirectly, more than 20% of the issued and outstanding Common Shares which, pursuant to the policies of the TSXV, results in the Senor Lender becoming a "Control Person". As a result, the Company is required to obtain shareholder approval with respect to: (i) an increase in the authorized share capital of the Company; and (ii) the Restructuring Transaction, including the creation of the Senior Lender as a "Control Person" (the "Shareholder Resolutions"). Each of the Shareholder Resolutions must be approved by a majority of the votes present in person or by proxy and voting on the Shareholder Resolution at the meeting called for such purpose, excluding Common Shares held by the Senior Lenders. A special meeting (the "Shareholder Meeting") of shareholders of Greenfields will be called on the same day as the Debentureholder Meeting, to consider the Shareholder Resolutions.

If Greenfields is unable to obtain the requisite approvals of the Debentureholders and the Shareholders, then any of such failures constitutes an event of default under the Fifth Amending Agreement and all loan amounts outstanding become immediately due and payable. In such case, Greenfields will be unable to pay such accelerated amounts and continue as a going concern.

Further details with respect to the Restructuring Transaction will be included in the information circular to be mailed to shareholders of Greenfields and Debentureholders in connection with the Debentureholder Meeting and the Shareholder Meeting. The Debentureholder Meeting and the Shareholder Meeting will be held promptly after completion of the Acquisition with closing of the Debenture Conversion and issuance of Common Shares and Warrants to the Senior Lenders to occur shortly thereafter upon satisfaction of all conditions related thereto. A copy of the Fifth Amending Agreement and the information circular will be filed on Greenfields' SEDAR profile and will be available for viewing at www.sedar.com.

The Acquisition and the Restructuring Transaction

The following are the key elements to the Restructuring Transaction:

  • allows the Company to consolidate its current one third (33.33%) interest in BEL and become the 100% shareholder of BEL;
  • reduces the Company's debt; and
  • reduces the Company's annual cash interest and financing expenses.

"The restructuring transaction provides the best available solution to reduce our debt levels, consolidate our interest in Bahar Energy Limited and normalize our capital structure to allow us to stabilize and fully exploit the potential of our asset in the Bahar ERDPSA," said John Harkins, President and Chief Executive Officer of Greenfields.

Management and the board of directors of Greenfields (the "Board") believe that the Restructuring Transaction is in the best interest of all stakeholders, and provides a number of benefits to the Company, including the following:

  • normalizes Greenfields' capital structure in order to persevere in the challenging oil price and equity market environment;
  • substantially improves financial strength and reduces financial risk; and
  • positions the Company to realize maximum value from its asset base.

Over the past twenty-two months, Greenfields has thoroughly investigated and exhausted a broad range of financial and strategic alternatives, all of which have failed to generate acceptable proposals. The significant decline in oil and gas prices has further exacerbated Greenfields' position with respect to asset distribution opportunities and other strategic alternatives.

The Board has determined that the Acquisition and the Restructuring Transaction are in the best interests of the Company, the Debentureholders and the current shareholders given, among other considerations, that such transactions will consolidate the Company's interest in the Project, will reduce Greenfields' net debt and simplify Greenfields' capital structure. The determination to approve the Restructuring Transaction was made based on a range of factors, including a verbal opinion received from Dundee Securities Ltd., Greenfields' financial advisor with respect to the Restructuring Transaction, addressed to the special committee of the Board that, subject to the review of the final form of documents, the Acquisition and the Restructuring Transaction are fair, from a financial point of view, to shareholders.

The Board believes that the Acquisition and the Restructuring Transaction are a significant and positive development for Greenfields and its stakeholders. It is a solution that is considered fair to the Debentureholders and to the current shareholders, and it delivers on the Company's key commitment to explore and pursue strategic options to improve its capital structure. The Board and management believe that the Acquisition and the Restructuring Transaction will create a financially stronger company and better allow for the pursuit of Greenfields' business and operational goals.

The Acquisition and Restructuring Transaction remain subject to approval in their entirety by the TSXV.

About Greenfields Petroleum Corporation

Greenfields is a junior oil and natural gas company focused on the development and production of proven oil and gas reserves principally in the Republic of Azerbaijan. The Company plans to expand its oil and gas assets through further farm-ins, and acquisitions of Production Sharing Agreements from foreign governments containing previously discovered but under-developed international oil and gas fields, also known as "greenfields". More information about the Company may be obtained on the Greenfields website at www.greenfields-petroleum.com.

Forward-Looking Statements

This press release contains forward-looking statements. Such forward-looking statements may include, but are not limited to, statements concerning: the Acquisition; the Restructuring Transaction; the Debentureholder Meeting and the Shareholder Meeting, including the timing thereof; the key elements of the Acquisition and the Restructuring Transaction, including the effect on the Company's debt and annual cash interest and financing expenses; the ability of Greenfields to exploit the potential of Greenfields' asset base in the ERDPSA; the benefits of the Acquisition and the Restructuring Transaction; and the future financial position and focus of the Company. In addition, the use of any of the words "scheduled", "can", "will", "prior to", "estimate", "anticipate", "believe", "should", "forecast", "future", "continue", "may", "expect", and similar expressions are intended to identify forward-looking statements. The forward-looking statements contained herein are based on certain key expectations and assumptions made by the Company, including, but not limited to, the Acquisition and the Restructuring; the ability of the parties to receive, in a timely manner, the necessary regulatory, court, Debentureholder, shareholder and other third party approvals and the ability of the parties to satisfy, in a timely manner and the other conditions to the closing of the Acquisition and the Restructuring Transaction. Although the Company believes that the expectations and assumptions on which the forward-looking statements are based are reasonable, undue reliance should not be placed on the forward-looking statements because the Company can give no assurance that they will prove to be correct.

Since forward-looking statements address future events and conditions, by their very nature they involve inherent risks and uncertainties most of which are beyond the control of Greenfields. Should one or more of these risks or uncertainties materialize, or should assumptions underlying the forward-looking information prove incorrect, actual results, performance or achievements could vary materially from those expressed or implied by the forward-looking information. These risks include, but are not limited to, the failure of the Company to obtain necessary securityholder, regulatory, and other third party approvals, or to otherwise satisfy the conditions to the Acquisition and the Restructuring Transaction in a timely manner, or at all. Additional risk factors can be found under the heading "Risk Factors" in Greenfields' Annual Information Form and similar headings in Greenfields' Management's Discussion & Analysis which may be viewed on www.sedar.com.

The forward-looking statements contained in this press release are made as of the date hereof and Greenfields undertakes no obligation to update publicly or revise any forward-looking statements or information, whether as a result of new information, future events or otherwise, unless so required by applicable securities laws. The Company's forward-looking information is expressly qualified in its entirety by this cautionary statement.

Neither the TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.

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