Groundstar Resources Limited
TSX VENTURE : GSA

Groundstar Resources Limited

December 16, 2016 17:10 ET

Groundstar Resources Limited Announces Closing of Flow-Through Financing and Provides Corporate Update

CALGARY, ALBERTA--(Marketwired - Dec. 16, 2016) -

NOT FOR DISTRIBUTION TO THE U.S.A. NEWS WIRE SERVICES OR FOR DISSEMINATION TO THE U.S.A.

Groundstar Resources Limited (TSX VENTURE:GSA) (the "Company") is pleased to announce that it has closed the initial tranche of it's offering of common shares in the capital of the Company being issued on a "flow-through" basis within the meaning of the Income Tax Act (Canada) (the "Flow-Through Shares") at a price of $0.02 per Flow-Through Share by way of a non-brokered private placement (the "Closing"). The Company issued a total of 5.875 million Flow-Through Shares pursuant to the Closing for total gross proceeds of $117,500. The Company paid finder's fees totaling $3,600 in connection with the Closing and issued broker warrants exercisable into 180,000 common shares in the capital of the Corporation ("Common Shares"), each such warrant exercisable into one Common Share at an exercise price of $0.05 for a period of eighteen (18) months following closing.

The Company intends to utilize the net proceeds from the Closing to fund seismic delineation and development of its light oil opportunities. The anticipated costs of these activities is approximately $220,000. Any excess proceeds from additional closings will be used for additional development of Company owned and Joint Venture lands. Any shortfall from this amount will be funded with the funds advanced under the Loan Agreement (as defined below), which transaction is described in more detail below.

The proceeds received by the Company from the sale of the Flow-Through Shares is expected to be used to incur eligible Canadian Exploration Expenses ("CEE") which will be renounced in favor of subscribers for the 2016 taxation year. Groundstar will be utilizing the Small Cap Company provision to allow for the conversion of eligible CEE to Canadian Development Expenses ("CDE"). This permits the Company to utilize the funds for lower risk Development drilling in contrast to higher risk Exploration drilling.

The Company also recently announced optimization at Neilburg has increased production with Groundstar currently netting 40-45 barrels of oil per day.

The Flow-Through Shares were issued on a private placement basis in the Provinces of Alberta, British Columbia and Ontario and are subject to a statutory hold period of four months and a day, expiring April 16, 2017. Closing of the offering and the issuance of the Flow-Through Shares are subject to final approval of the TSX Venture Exchange. The offering remains open to all existing shareholders of the Company and such other individuals or entities as the Company may determine in its sole discretion. It is currently anticipated that insiders of the Company will subscribe for a significant amount of the offering.

This news release does not constitute an offer to sell or a solicitation of an offer to buy any of the securities in the United States. The securities have not been and will not be registered under the United States Securities Act of 1933, as amended (the "U.S. Securities Act") or any state securities laws and may not be offered or sold within the United States or to U.S. Persons unless registered under the U.S. Securities Act and applicable state securities laws or an exemption from such registration is available.

The Company is also providing an update to its press release issued on December 5, 2016 regarding the execution of a loan agreement (the "Loan Agreement") with a private Alberta-based lender (the "Lender") which provided for the Company to borrow an amount of up to CDN$250,000 to fund its general working capital requirements and to further operations on its properties. The Loan Agreement provides that the funds advanced shall be repayable over a term of twelve months, starting on December 15, 2016, subject to an extension of an additional twelve months with the consent of the Lender. In consideration of the loan amounts provided under the Loan Agreement, the Company shall pay interest in the amount of 10% per annum on all amounts borrowed. In addition, pursuant to the Loan Agreement, the Company will be providing security in all of its assets to the Lender as collateral for the loan pursuant to a general security agreement. The Company anticipates servicing the amounts owing under the Loan Agreement through revenue generated by its operating activities. In connection with the Loan Agreement, the Company paid a finder's fee in the amount of 5% of the amount advanced under the Loan Agreement to Steeple Capital Partners, a company of which Stephen Hughes, a director of the Company, is a significant shareholder and an officer. The TSX Venture Exchange has granted discretionary relief allowing for the payment of this finder's fee given that the finder was specifically commissioned by the Company to locate, arrange or acquire this measureable benefit for the Company which it would not have otherwise obtained.

About Groundstar Resources Limited

Incorporated in 1968, Groundstar Resources Limited is a publicly traded oil and gas company actively growing a portfolio targeting producing oil and gas assets with development opportunities and exploration upside. The Company's current portfolio of resource assets provides both near term and longer term potential. Groundstar is quoted and trades under the ticker symbol "GSA" on the TSX Venture Exchange.

Disclaimers

This press release contains forward-looking statements within the meaning of applicable securities laws, including expectations regarding the anticipated use of proceeds from the Closing. Although the Company believes that the expectations reflected in such forward-looking statements are reasonable, it can give no assurance that such expectations will prove to be correct. These statements are subject to certain risks and uncertainties and may be based on assumptions that could cause actual results to differ materially from those anticipated or implied in the forward-looking statements. These risks include, but are not limited to: the risks associated with the oil and gas industry (e.g. operational risks in development, exploration and production; delays or changes in plans with respect to exploration or development projects or capital expenditures; the uncertainty of reserve and resource estimates; the uncertainty of estimates and projections relating to production, costs and expenses and health, safety and environmental risks), commodity price and exchange rate fluctuation, uncertainties resulting from potential delays or changes in plans with respect to exploration or development projects or capital expenditures and uncertainties regarding whether final regulatory approval for the Closing will be received and if received, on the timelines expected and at the anticipated pricing, as well as the intended use of the net proceeds of the Closing. The Company's forward-looking statements are expressly qualified in their entirety by this cautionary statement. The forward-looking statements contained in this press release are made as of the date hereof and the Company undertakes no obligations 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.

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 press release.

Contact Information:

Groundstar Resources Limited, Suite 2300, 144 4th Avenue SW, Calgary, Alberta T2P 3N4

www.groundstarresources.com

Contact Information