MENA Hydrocarbons Inc.

MENA Hydrocarbons Inc.

September 16, 2014 09:17 ET

MENA Hydrocarbons Announces Sale of Lagia Project

CALGARY, ALBERTA--(Marketwired - Sept. 16, 2014) - MENA Hydrocarbons Inc. ("MENA" or the "Company") (TSX VENTURE:MNH) ("MENA" or the "Company") is pleased to, announce that it has entered into a share purchase agreement (the "Share Purchase Agreement") with SacOil Holdings Limited (JSE:SCL)(AIM:SAC) ("SacOil" or the "Purchaser").

The Share Purchase Agreement dated September 9, 2014 provides that SacOil will acquire Mena International Petroleum Company Ltd, a Cyprus-registered exploration and production company, ("MIP"), from Mena International Petroleum Holdings Company Ltd (the "Seller"), a wholly-owned subsidiary of the Company (the "Transaction"), subject to certain conditions. The principal asset of MIP is the Lagia Project in Egypt. SacOil's announcement can be found at:

Magdy Bassaly, President and Chief Executive Officer of MENA stated "The interest shown by SacOil in the Lagia properties and the offer made by SacOil to purchase the project for a combination of cash and shares represents a great opportunity for MENA shareholders to continue to participate in future development of these assets as well as the African assets in SacOil's portfolio. We strongly believe the combined assets and SacOil's knowledge and expertise in the African continent will provide a very exciting future and value creation for all stakeholders. Further, not only do our shareholders participate in the upside of SacOil through the proposed distribution of shares as outlined below, but all shareholders will continue to hold MENA Hydrocarbon shares as well. Our Board and Management have already been investigating opportunities and will continue to identify projects for MENA going forward."

Anticipated Distribution

In connection with the closing of the Transaction, the Company intends to use the cash portion of the Purchase Consideration discussed below (US$1,857,319) to settle certain outstanding promissory notes issues by MIP to non-arm's length parties, as required by the terms of the Share Purchase Agreement. In addition, the Company intends to withhold 5,510,008 (equivalent to US$300,000) of the Consideration Shares to meet its ongoing working capital needs. If no additional sources of funding are obtained post-closing, the aggregate liabilities of the Company will be settled in the ordinary course of business, including by way of the payment of cash on hand and the sale from time to time of the Consideration Shares which are to remain held by the Company post-Arrangement. At the time that the Arrangement is effected, the Company anticipates that approximately 178,156,939 Consideration Shares will be available for distribution to the shareholders of the Company on a pro rata basis to effect the dividend contemplated by the Plan of Arrangement (the "Dividend"). Shareholders are cautioned that these amounts represent estimates only and there can be no guarantee that such amounts, or any amount, will be available for distribution. In the event that there is insufficient cash available to pay the claims of creditors, and if alternate terms cannot be negotiated, the Company may be required to sell additional Consideration Shares for cash and use the proceeds to settle creditor claims prior to any distribution to the shareholders of the Company.

The Company intends to effect the Transaction and the proposed Dividend by way of a plan of arrangement under s. 193 of the Business Corporations Act (Alberta) (the "Arrangement"), which will be described in further detail in the Company's management information circular to be mailed in connection with the Company's upcoming annual general and special meeting ("AGSM"), scheduled for October 10, 2014. MENA shareholders will be asked to approve the Arrangement to give effect to the transactions contemplated by the Share Purchase Agreement and the Dividend, as well as approve a proposed consolidation (the "Consolidation") and the proposed Shares for Debt transactions. The approval by shareholders of the transactions contemplated by the Share Purchase Agreement and effected by the Arrangement will require the approval of two thirds of the votes cast at the AGSM.

Rationale for the Acquisition

Under the terms of the Share Purchase Agreement, SacOil has agreed to purchase all of the ordinary shares of MIP and thereby acquire the Company's interest in the Lagia Project, which represents substantially all of the assets of MENA. The purchase price is US$14,100,000, payable as to US$1,857,319 in cash, the indirect assumption by the Purchaser of US$2,242,681 in liabilities of MENA Opco which will remain unpaid at closing and the issuance of an aggregate of US$10,000,000 in value of ordinary shares of the Purchaser (the "Consideration Shares"), subject to adjustment in accordance with the terms of the Purchase Agreement. The deemed value of each Consideration Share is ZAR0.582, being the volume weighted average trading price of the Consideration Shares on the Johannesburg Stock Exchange for the 30 day period immediately prior to the date of the Purchase Agreement, which has been converted to US dollars at a ratio of ZAR10.681:US$1.00 being the average of the South African Reserve Bank's published average 10:30 a.m. rate for the 30 Business Days immediately prior to the date of the Purchase Agreement. The Company anticipates that this will result in an aggregate of 183,666,947 Consideration Shares being issued to the Company, subject to adjustment in accordance with the terms of the Purchase Agreement. After completion of the Transaction, the Company will have no further direct or indirect interest in the Lagia Project. The Consideration Shares will be subject to a four month hold period pursuant to the terms of the Share Purchase Agreement.

The closing is subject to customary conditions precedent and closing conditions, including (i) MENA shareholder approval; and (ii) SacOil shareholder approval; and (iii) applicable regulatory approvals.

Readers are cautioned to read the full text of the Share Purchase Agreement, which is available at under the Company's profile.

In connection with the Transaction and management's strategy to improve the Company's working capital position, the Company intends to enter into and seek TSXV approval for a number of shares for debt transactions (the "Shares for Debt Transactions") in order to reduce the indebtedness owed to directors, officers, non-arm's length parties and trade creditors of the Company and a provider of legal services (collectively, the "Creditors"). The Company currently owes an aggregate of approximately C$3,625,295 to such Creditors. Assuming all Creditors participate, the Company could be required to issue approximately 241,686,333 Common Shares at a price of C$0.015 per share based on the price of the Common Shares as at the close of markets on September 9, 2014, subject to the policies and pricing discretion of the TSXV. Completion of the Shares for Debt Transactions is subject to receipt of applicable TSXV acceptance and shareholder approval.

All Common Shares issued pursuant to the Shares for Debt Transactions will be issued on a pre-Consolidation basis and are proposed to be issued prior to the closing of the Transaction, therefore the former Creditors will participate pro rata in the Distribution as shareholders of the Company. The shares issued in connection with the Shares for Debt Transactions will be subject to a four month hold period in accordance with applicable securities law.

Readers are cautioned that there can be no assurance the Creditors will agree to participate in the Shares for Debt Transactions and if so, to what extent. If the Company is unable to complete the Shares for Debt Transactions as anticipated the Company may be required to sell assets (including the Consideration Shares) in order to pay its liabilities.

The Consolidation will be proposed to shareholders at the AGSM, and such approval would authorize the board of directors of the Company to effect the timing and exact ratio of the Consolidation at their discretion, subject to a maximum ratio of 10:1 and a deadline of 6 months from the date the Consolidation is approved.

Further information regarding all of the AGSM matters will be provided at the time the Company mails the applicable information circular.

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.

Certain information set out in this News Release constitutes forward-looking information. Forward-looking statements (often, but not always, identified by the use of words such as "expect", "may", "could", "anticipate" or "will" and similar expressions) may describe expectations, opinions or guidance that are not statements of fact and which may be based upon information provided by third parties. Forward-looking statements are based upon the opinions, expectations and estimates of management of the Company as at the date the statements are made and are subject to a variety of known and unknown risks and uncertainties and other factors that could cause actual events or outcomes to differ materially from those anticipated or implied by such forward-looking statements. Those factors include, but are not limited to, the ability of the Company to complete the transaction contemplated by the Share Purchase Agreement and to satisfy the conditions precedent thereto, the uncertainty of the value of the non-cash consideration anticipated to be received and the ability of the Company to satisfy its liabilities, uncertainties and other factors that are beyond the control of the Company, risks associated with the industry in general, commodity prices and exchange rate changes, operational risks associated with exploration, development and production operations, delays or changes in plans, risks associated with the uncertainty of reserve or resource estimates, health and safety risks and the uncertainty of estimates and projections of costs and expenses. In light of the risks and uncertainties associated with forward-looking statements, readers are cautioned not to place undue reliance upon forward-looking information. Although the Company believes that the expectations reflected in the forward-looking statements set out in this press release or incorporated herein by reference are reasonable, it can give no assurance that such expectations will prove to have been correct. The Company does not undertake to update any forward-looking statements except as required by law.

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