Kulczyk Oil Ventures Inc.

WARSAW : KOV


Kulczyk Oil Ventures Inc.

December 18, 2012 05:46 ET

KOV And KI Agree To Amended Terms For Loan

CALGARY, ALBERTA--(Marketwire - Dec. 18, 2012) - Kulczyk Oil Ventures Inc. ("Kulczyk Oil", "KOV" or the "Company") (WARSAW:KOV), an international upstream oil and gas exploration and production company, is pleased to announce that the terms of the June 2012 loan agreement with Kulczyk Investments SA ("KI") (the "Original Agreement") have been amended to, among other things, extend the term of the Loan (as defined below) by one year from 31 December 2012 to 31 December 2013 and make amounts owing under the Loan convertible into common shares of KOV ("Common Shares"). All dollar amounts in this press release are expressed in United States currency.

Funding Arrangement

The Original Agreement for the provision by KI of up to an aggregate principal amount of $12 million in funding (the "Loan") to KOV was finalized in June 2012. The Loan was intended, and is intended to continue, to assist with the funding of KOV's ongoing working capital requirements.

Under the terms of the amended agreement (the "Amended Agreement"), the term of the Loan was extended by one year from 31 December 2012 to 31 December 2013 (the "Maturity Date") and all amounts owing under the Loan were made automatically convertible into Common Shares upon the completion by KOV of an "IPO" prior to the Maturity Date or, alternatively, convertible, at the option of KI, into Common Shares at any time during the term of the Loan.

The Amended Agreement provides that KOV shall use its commercially reasonable efforts to complete an IPO by no later than the Maturity Date (being 31 December 2013). For the purposes of the Amended Agreement, an "IPO" is defined as: (a) the initial public offering or the admission to trading of the Common Shares on the AIM Market of the London Stock Exchange; (b) the acquisition of KOV by an entity listed on a recognized stock exchange for securities of such entity; (c) the acquisition of an entity listed on a recognized stock exchange by KOV for securities of KOV; or (d) any transaction or arrangement which results in KOV being listed, directly or indirectly, on a recognized stock exchange other than the Warsaw Stock Exchange ("WSE"). In the event of an IPO, the Amended Agreement provides for the automatic conversion of the outstanding principal amount under the Loan, together with all accrued and unpaid interest thereon and any other fees or costs payable by KOV to KI in connection with the Loan, if any, (collectively, the "Obligations") into Common Shares. If Common Shares are issued by KOV in connection with the IPO, the conversion price will be either the offer price per Common Share in the IPO or the issue price per Common Share in the IPO. If no Common Shares are issued by KOV in connection with the IPO, the conversion price will be either the volume weighted average price ("VWAP") of a Common Share on the WSE during the five trading days prior to and excluding the date of the IPO or the exchange ratio per Common Share in the IPO.

If KI chooses to exercise its option to convert any or all of the outstanding Obligations into Common Shares at any time during the term of the Loan, the conversion price will be the VWAP of a Common Share on the WSE during the five trading days prior to, and excluding, the date of the conversion election notice.

Under the terms of the Amended Agreement, interest, payable monthly, remains unchanged at 15% per annum. The Loan is currently drawn at $10 million and the balance of the loan is expected to be drawn down by the end of December 2012.

The total number of Common Shares issuable to KI if the Obligations are converted is uncertain as the amount of the Obligations to be converted and the final conversion price will be determined in the future.

KI, the major shareholder of KOV, is an international investment house founded by Polish businessman Dr. Jan Kulczyk, the former Chairman of the board of directors of KOV. Dariusz Mioduski, the current Chairman of the board of directors of KOV, is the Chief Executive Officer of KI and Manoj Madnani, a director of KOV, is a member of the Supervisory Board of KI. KI presently holds approximately 241 million Common Shares, representing, in aggregate, approximately 49.9% of the outstanding Common Shares.

About Kulczyk Oil

Kulczyk Oil is an international upstream oil and gas exploration and production company with a diversified portfolio of projects in Ukraine, Brunei and Syria and with a risk profile ranging from exploration in Brunei and Syria to production and development in Ukraine. The common shares of the Company trade on the Warsaw Stock Exchange under trading symbol "KOV".

In Ukraine, KOV owns an effective 70% interest in KUB-Gas LLC. The assets of KUB-Gas consist of 100% interests in five licences near to the City of Lugansk in the northeast part of Ukraine. Four of the licences are gas producing.

In Brunei, KOV owns a 90% working interest in a production sharing agreement which gives the Company the right to explore for and produce oil and natural gas from Block L, a 1,123 square kilometre area covering onshore and offshore areas in northern Brunei.

In Syria, KOV holds a participating interest of 50% in the Syria Block 9 production sharing contract which provides the right to explore for and, upon the satisfaction of certain conditions, to produce oil and gas from Block 9, a 10,032 square kilometre area in northwest Syria. The Company has an agreement to assign a 5% ownership interest to a third party which is subject to the approval of Syrian authorities, and which, if approved, would leave the Company with a remaining effective interest of 45% in Syria Block 9. KOV declared force majeure, with respect to its operations in Syria, in July 2012.

The main shareholder of the Company is Kulczyk Investments S.A., an international investment house founded by Polish businessman Dr. Jan Kulczyk.

For further information, please refer to the Kulczyk Oil website (www.kulczykoil.com)

Translation: This news release has been translated into Polish from the English original.

Forward-looking Statements This release may contain forward-looking statements made as of the date of this announcement with respect to future activities of KOV that are not historical facts, including the intended use of proceeds of the Loan, the completion by KOV of an IPO, the total principal amount to be drawn down by KOV pursuant to the Amended Agreement, the number of Common Shares to be issued to KI pursuant to the Amended Agreement and the conversion price. Although the Company believes that its expectations reflected in the forward-looking statements are reasonable as of the date hereof, any potential results suggested by such statements involve risk and uncertainties and no assurance can be given that actual results will be consistent with these forward-looking statements. Various factors that could impair or prevent the Company from completing the expected activities on its projects include that the Company's projects experience technical and mechanical problems, there are changes in product prices, failure to obtain regulatory approvals, the state of the national or international monetary, oil and gas, financial, political and economic markets in the jurisdictions where the Company operates and other risks not anticipated by the Company or disclosed in the Company's published material. Since forward-looking statements address future events and conditions, by their very nature, they involve inherent risks and uncertainties and actual results may vary materially from those expressed in the forward-looking statement. The Company undertakes no obligation to revise or update any forward-looking statements in this announcement to reflect events or circumstances after the date of this announcement, unless required by law.

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