Petromanas Energy Inc. ("Petromanas" or the "Company") has initiated a process to identify potential strategic alternatives relating to the sale of all or a portion of the world class oil opportunity which it is developing in Albania with its partner, Royal Dutch Shell plc ("Shell").
We contemplate that a successful transaction would result in a corporate sale, combined with a spin-out to existing shareholders of the Company's assets in France and Australia, but other transaction structures will be considered. Petromanas has retained Peters & Co. Limited ("Peters & Co.") as its exclusive financial advisor to assist in this process. Data rooms will open the second week of October 2014 with a bid date to be set in the fourth quarter of 2014.
Petromanas Corporate Highlights
Rare World Class Oil Opportunity: Petromanas holds a 25% working interest in Blocks 2 and 3 in Albania which cover over 213,000 net acres. The Blocks have underlying prospects ranging from 142 to 233 MMBOE recoverable resource.
Strategic Early Entry Opportunity: Targeting high impact, large oil-in-place and under-explored light oil resource in Albania.
Exploration and Development: Two sub-thrust prospects quantified by GLJ Petroleum Consultants Ltd. ("GLJ"). Nine existing oil fields on Blocks 2 - 3 owned by other operators. Albania boasts Europe's largest onshore oilfield, Patos Marinza (5.4 billion barrels OOIP).
Analogs: Direct analogs are the Val D'Agri and Tempa Rossa oil fields in Southern Italy. Val D'Agri is by far the most significant producing oil development in Italy, and is being developed by Shell and its partners in multiple stages, with anticipated peak oil production of 100,000 BOE/d. The Tempa Rossa oil field, east of Val D'Agri, is expected to produce at a production plateau of approximately 50,000 BOE/d.
Joint Venture Partner: Petromanas' partnership with Shell validates the resource potential of the play, and affords Petromanas the ability to leverage Shell's long-term experience developing analog plays in Italy. Development is Accelerating: Petromanas and Shell are negotiating
to secure a second rig to accelerate commercialization of the oil field and proceed to full field development of sustainable long-term production estimated at 40,000 BOE/d.
Material Upside: July 2011 resource report estimated (Pmean) UPIIP of 856 and 528 MMBOE and unrisked prospective resources of 233 and 142 MMBOE at Shpirag and Molisht, respectively. An updated resource evaluation by GLJ is expected in October 2014 which will include additional prospects not yet quantified.
Stable Operating Environment: Albania is a WTO member, NATO member and a candidate for European Union membership.
Favourable Economics: Albania's energy sector features attractive fiscal terms and access to Brent pricing given its strategic location and allowance for crude oil exports.
Information Memorandum
Peters & Co. Limited 2300 Jamieson Place 308 Fourth Avenue SW Calgary, Alberta, Canada T2P 0H7 www.petersco.com Steve R. Woima Principal, Head Acquisitions & Divestitures (403) 261-2264 [email protected] J.G. (Jeff) Lawson Principal, Corporate Finance
(403) 261-2298 [email protected] Petromanas Overview
Albania
Overview
Country Overview
Albania is bordered by Montenegro and Kosovo to the north, Macedonia to the east, Greece to the southeast and the Adriatic and Ionian seas to the west.
Capital city: Tirana; currency: Albanian lek; language: Albanian; population: 3,020,209 (July 2014).
Albania declared its independence from the Ottoman Empire in 1912, was conquered by Italy in 1939, was occupied by Germany in 1943 and came under communist rule in 1944. As a communist state, Albania allied with the USSR until 1960 and China until 1978. During the early 1990s Albania established a multi-party democracy leading to a period of instability, but has since become a member of NATO, a member of the WTO and is a European Union candidate.
Oil & Gas Overview
Historically, all petroleum activities in Albania were conducted by Albpetrol (Albania's state owned oil company).
Albania held its first and second onshore licensing rounds in 1992 and 1994, respectively. Companies awarded 11 total blocks in the licensing rounds included: Shell, Coparex, INA Naftaplin of Croatia, OMV, Enterprise, Gulf Canada Resources, MOL, Occidental, Lundin Petroleum and Forest Oil International.
The first offshore licensing round in Albania occurred in 1990 and resulted in the award of a total of five blocks to Deminex, OMV, Eni, Occidental, Chevron and BHP.
In 1997 Albania was engulfed by civil unrest and exploration activity in the country ceased. By the early 2000s a degree of stability had returned and exploration activity resumed.
In February 2010, Petromanas completed the acquisition of three onshore PSCs in Albania containing six licenses and changed its name from "WWI Resources Ltd." to "Petromanas Energy Inc". By June 2013 Petromanas had farmed-out a 75% interest in Blocks 2 and 3 to Shell. As of 2013, the only foreign companies involved in onshore exploration
were Petromanas, Shell, Bankers Petroleum Ltd., Stream Oil & Gas Ltd. and Transoilgroup AG.
As of 2013 Albania was a net exporter of oil and produced approximately 24,000 Bbls/d. In January 2014, the country had estimated proved plus probable reserves remaining of 176 million Bbls of oil and 17 Bcf of gas. Regulatory Framework
In order to recover resources in Albania, an interested party must typically obtain a Production Sharing Contract ("PSC"). However, it is possible for a party to explore by means of aerial, geophysical, geochemical, paleontological, geological, topographical and seismic surveys through the use of a non-exclusive Reconnaissance Permit.
The PSC's initial exploration period is for a period of up to three years including a minimum work program, which can be extended for two additional exploration periods up to a maximum of seven years. When a commercial discovery is made, the operator may extend the agreement for up to 25 years for development and production.
At the end of the initial exploration period 25% of the original contract area must be surrendered. A further 25% of the remaining contract area must be surrendered at the end of the second exploration period. At the termination of the exploration periods all remaining acreage not deemed a commercial discovery is relinquished.
The responsibility for energy matters in Albania lies with the Ministry of Energy and Industry. Within this Ministry the responsibility for petroleum activities lies with the National Agency for Natural Resources (AKBN). Albania Onshore Blocks
Petromanas PSC Terms & Joint Operating Agreement (Blocks 2 - 3) Working Interest: 25% Petromanas (Operator); 75% Shell.
Shell equalized sunk costs.
Shell to carry Petromanas on current drilling program (Blocks 2 - 3): Shpirag-2 well carry to gross $50 million cap;
Molisht-1 well carry to gross $50 million cap; Shpirag-3 carry to gross $42.5 million cap;
Seismic program actual carry to gross $33.5 million; and If actual well cost is less than cap amount, the increment is
paid to Petromanas.
Shell technical assistance carry to gross $2 million.
Status: In January 2014 Petromanas informed the Albanian government of a discovery on Blocks 2 - 3 and the Blocks are currently in their second exploration period.
Fiscal Terms
Each licensed block is a negotiated PSC (terms may vary with agreement).
Once work commitments are completed, the operator earns 100% working interest in all oil and gas production from the PSC, less a government take. This includes:
Before cost recovery:
Royalty of 10%.
After cost recovery:
Royalty of 10%;
Government allocation of 0 to 5% of gross revenue; Government profit share of 0 to 15% of profit oil; and Profit tax of 50% of net profit of company profit share.
Production bonus payments depending on the PSC agreement. Oil and natural gas can be fully exported and sold at Brent based prices. VAT (20%) exemption for all oil and gas exploration goods and services.
Oil Infrastructure
Pipeline from Patos Marinza field to Fier Hub.
New four lane highway with trucking capability of 30,000 Bbls/d from Fier Hub to Vlore.
70,000 Bbls/d (Bankers Petroleum) pipeline approved connecting the Fier Hub to the Vlore port.
Petrolifera port terminal in Vlore with tanker loading capacity of 60,000 – 140,000 Bbls (expansion planning underway).
Older 12 inch, 196 km crude oil gathering pipeline connects Patos Marinza, Kucova oil fields, Ballsh and Fier refineries to Vlore Port.
Gas Infrastructure
Trans Adriatic Pipeline ("TAP") proposed route from Turkey / Greece through Albania and across Adriatic Sea to Italy.
Refining Infrastructure
Two refineries located near Petromanas' acreage at Ballsh and Fier; both are currently offline.
Albania
Petromanas Contracts, Joint Operating Agreement and Regional Infrastructure
Required Minimum Work
Completion Requirement USD Period 2 June 2016 Geological and
geophysical studies Spudding an exploration well to 4,000 meters Period 3 Within two Geological and
years of geophysical studies period 2 Spudding an exploration
well to 4,000 meters
$300,000 $8,000,000 $300,000 $8,000,000 Albania Work Program Blocks 2 - 3
Albania Geology
Regional Geology
Albania Geology
Conventional, Thrust Belt Geology: Onshore Albania is a world-class hydrocarbon province located within deformed foreland basin associated with the Albanide fold and thrust belt.
Established Albanian Oil and Gas Fields: Numerous large oil and gas/condensate fields are located proximal to the Petromanas' Shpirag Discovery and Molisht Prospect.
Large Analog Oil Fields: Similar geological and h y d r o c a r b o n s e t t i n g in southern Italy with established Billion barrel oil fields.
Albania Geology
Oil and Gas Fields
Petromanas Oil Discoveries and Research
UPIIP Mean Results Unrisked Prospective Resources Mean Results
Prospect MMBbls Bcf MMBOE MMBbls Bcf MMBOE
Shpirag 614 1,455 856 136 581 233
Molisht 390 826 528 87 331 142
Source: GLJ resource evaluation effective July 31, 2011.
GLJ Prospective Resource Evaluation
Significant Resource Potential: Petromanas Shpirag and Molisht projects on Albania Blocks 2 - 3 have recognized resource ranging from 500 to 850 MMBOE (GLJ, UPIIP).
Shpirag Oil Discovery: Petromanas operated Shpirag light oil discovery located in the fractured Eocene to Cretaceous-aged (Ionian Zone) carbonate reservoir with an ~800 m light oil column identified.
Molisht Oil Prospect: Currently drilling with expected results in Q4, 2014. Additional leads are identified along the same structure on Petromanas lands.
Petromanas Well Results and Development Potential
Albania Geology
Shpirag Oil Discovery and Molisht Prospect
Shpirag Light Oil Discovery: The main Sqepur thrust is the primary target in both the Petromanas Shpirag and Molisht projects located within onshore Blocks 2 - 3:
Fractured Cretaceous carbonate reservoir at depths ranging from 4,000 to 5,800 m TVD. Shpirag-2 Oil Discovery: Petromanas operated
Shpirag-2 oil discovery identified an ~800 m light oil column:
Shpirag-2 tested rates ranging from 1,500 to 2,200 BOE/d;
800 to 1,300 Bbls/d of 35°-37° API oil;
2 to 5 MMcf/d gas; and
Molisht Prospect Currently Drilling: Petromanas operated Molisht-1 is targeting a similar thrusted Eocene-Cretaceous-aged carbonate reservoir that tested oil in the Shpirag-2 well to the north.
250 m thick Eocene-aged fractured carbonate encountered uphole.
SHPIRAG
PROSPECT(S)
Section = Area of
Seismic Line OXY98-05
PATOS-MARINZA OIL FIELD (Clastics)
CAKRAN
OIL FIELD VISOKA/BALLSH OIL FIELDS
BASEMENT?
Berati Thrust Sheet Jurassic Carbonate Jurassic Carbonate Triassic Carbonate Triassic Evaporite Triassic Evaporite?
Lower Oligocene Flysch
Cretaceous Ionian Zone Carbonate Kurveleshi Thrust Sheet
Lower Oligocene Flysch Tortonian Messinian
Serravalian Pliocene
Cretaceous Ionian
Zone Carbonate Sheet (TARGET)Sqepur Thrust
Flysch Sea Level
-2,500 m -5,000 m -7,500 m -10,000 m -12,500 m -15,000 m
Horizontal Scale = Vertical
Triassic Carbonate Jurassic Carbonate
Shpirag-1 (tested oil from Sqepur sheet)
Source: Modified from Petromanas, 2014 Shpirag Discovery - Schematic Cross Section
B
B
B'
France & Australia
Overview of Assets
France Highlights
Significant Land Base: 100% W.I. in 170,000 gross acres in two onshore permits, Ger and Ledeuix. The permits are in close proximity to the 9 Tcf Lacq field and 2 Tcf Meillon field.
Exploration and Development: Multiple prospective gas reservoirs; Eocene, Lower Cretaceous and Jurassic.
Attractive Fiscal Environment: No royalties on first 10.6 Bcf/field/ year gas production, then 5% royalty, 34% income tax. Access to premium gas prices of ~US$10/Mcf.
Status: Five year permit renewals in progress. Ger permit (293 km2, 72,400 acres):
Work commitment: three million Euros in next five-year term. Ledeuix permit (394 km2, 97,360 acres):
Work commitment: eight million Euros in next five-year term; and Hagolle-2 drilling license approved; plan to re-license for 4,500 m.
Australia Highlights
Exploration potential: 100% W.I. in approximately 1.6 million acres on exploration blocks EP 464 and EP 486 in the Canning Basin in western Australia.
Seismic program: A 2D seismic program is planned for 2015 and is anticipated to cost approximately AUD$4.5 million.
Minimum work program: The exploration rights to EP 464 and EP 486 are associated with a commitment to incur expenditures over a six-year term. The work commitments are:
France Assets
Unrisked UPIIP (BCF)
Permit Area Formation Low Best Mean High
Ledeuix Ledeuix(1) Saucede 232 556 751 1,423 Ger Ossun(2) Flysch/Eocene 69 177 247 506 Azereix/Ger(2) Eocene 7 45 82 195
Aptian 56 162 270 598
Barremian 31 128 187 419
Unrisked UPIIP Oil (MSTB) Azereix(2) Aptian 650 1,608 2,207 4,430 (1) GLJ undiscovered petroleum initially in place evaluation effective July 31, 2014 for the Ledeuix permit.
(2) GLJ undiscovered petroleum initially in place evaluation effective September 30, 2011 for the Ger permit.
France Resource Assessment
Year Minimum Work Requirement AUD
2014 482 km new 2D seismic survey $4,000,000
2014 Geotechnical studies $1,000,000
2015 Drill two exploration wells $8,000,000 Australia Work Program EP 464
Year Minimum Work Requirement AUD
1 150 km 2D seismic reprocessing $250,000 2 100 km new 2D seismic survey $1,300,000 3 150 km2 new 3D seismic survey $3,850,000
4 One exploration well $3,500,000
5 One exploration well $3,500,000
6 100 km new 2D seismic survey $1,100,000 Australia Work Program EP 486
Corporate Overview
February 2010 Completed the acquisition of three PSCs in Albania and changed name from "WWI Resources Ltd." to "Petromanas Energy Inc." August 2010 Appointed Glenn McNamara as CEO and Bill Cummins as CFO effective September 2010
November 2010 Completed a seismic program on Blocks D - E in Albania
January 2011 Appointed Steve Farner as Vice President Exploration effective January 2011 March 2011 Completed a seismic program on Blocks 2 - 3 in Albania
August 2011 Announced the results of a resource evaluation report for their Albanian PSCs completed by GLJ Petroleum Consultants Ltd. December 2011 Secured a drilling rig for use in the 2012 drilling program
February 2012 Entered into a farm-out agreement with Shell for a 50% interest on Blocks 2 - 3 for payments and carried costs of up to US$50.3 million June 2012 The Shpirag-2 well on Blocks 2 - 3 in Albania was spud
October 2012 Entered into an agreement to acquire Gallic Energy Ltd. for an all share consideration of approximately C$10 million
December 2012 The Juban-1 well on Block A in Albania was spud and the acquisition of Gallic Energy Ltd. was completed (France and Australia) May 2013 Awarded a petroleum exploration permit with a six-year term for the EP 486 Block in Australia
June 2013 Shell purchased a further 25% interest in Blocks 2-3 for consideration of approximately US$22 million. Announced intention to relinquish Blocks A - B August 2013 The Molisht-1 well on Blocks 2 - 3 in Albania was spud
October 2013 The Shpirag-2 well on Blocks 2 - 3 tested at a rate of 1,500 to 2,200 BOE/d during a three-day test January 2014 Formally informed the Albanian government of a discovery on Blocks 2 - 3
June 2014 Entered the second exploration period on Blocks 2 - 3 History of the Company
2012 2013 2014 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Next Steps Region Blocks 2 - 3 France Australia Shell
50% JV Shpirag-2 75% JV Shell Shpirag-2
Technical
Evaluation FarmoutProcess
Technical
Evaluation FarmoutProcess Gallic Acquisition 2nd Period Molisht-1 2D Seismic Gov’t Approval of JV Declare Shpirag Discovery ▪ Permit renewal ▪ Drilling preparations ▪ Complete farmout process ▪ Complete farmout process ▪ Reach TD at Molisht-1 ▪ Spud Shiprag-3 ▪ Complete/test Molisht-1 ▪ Obtain resource assessment
Well Spud Well Test Exploration Activity Joint Venture Activity Corporate Timeline
Corporate Overview
(Continued)
Amount ($CAD) Share price as of October 1, 2014 $0.22
Common shares outstanding 693.9
Options outstanding 41.9
Weighted average exercise price of options $0.27
Warrants outstanding 100.0
Weighted average exercise price of warrants $0.45
Performance shares outstanding 50.0
52 week low / high $0.10 / $0.40
Market value of equity (basic) $149.2
Exchange rate (USD/CAD) $0.90
Net cash as at June 30, 2014 ($25.2)
Enterprise value (basic) $123.9
Capitalization Summary
Petromanas Energy Inc.
(Alberta, Canada) Petromanas Energy France SAS Gallic Lux 1 EP 464 Permit 100% EP 486 Permit 100% Ger Permit 100% Ledeuix Permit 100% Blocks 2 - 3 25% Gallic Lux 2
Exceed Energy (Australia) Pty Ltd.
(Australia) Petromanas Albania (GmbH)(Albania)
Corporate Structure
Name Title Background
Glenn McNamara Chief Executive Officer and Director Over 30 years of oil and gas experience in Canada, the USA, South America and the Asia Pacific region. Formerly President of BG Canada and has held senior executive positions at Exxon Mobil/Imperial Oil Resources, Exxon Mobil Canada and Mobil Oil Canada. Peter Sider Vice President, Engineering, Operations and
Business Development Over 30 years of domestic and international oil and gas experience. Formerly Managing Director and Vice President, European Operations of Vermilion Energy Inc., Chief Operating Officer of Grad & Walker Energy Corp., has held senior operational roles at Amocco Canada Petroleum Company and has experience as a venture capitalist. Bill Cummins Chief Financial Officer and Corporate
Secretary Over 20 years of experience in the oil and gas industry. Former Chief Financial Officer of a TSX listed international oil and gas company, senior financial executive of an international joint venture and Vice President, Corporate Finance and Director of an independently owned brokerage firm.
Steve Farner Vice President, Exploration Over 30 years of experience as a geoscientist in Canada, the USA, Australia, southeast Asia and Europe. Former founder of three exploration companies and has held positions of increasing responsibility with Superior Oil, Mobil Oil and Exxon Mobil Canada, contributing to both domestic and international exploration.
Management Team
Name Title
Verne Johnson Chairman Frank Giustra Director Jeffrey Scott Director Gerard Protti Director General Wesley Clark Director Gordon Keep Director
Glenn McNamara Chief Executive Officer and Director Board of Directors
Resource Engineers GLJ Petroleum Consultants Ltd.
Auditor KPMG LLP
Legal Counsel Norton Rose Canada Corporate Information
Sale Process and Contacts
Petromanas Energy Inc. ("Petromanas" or the "Company") has retained Peters & Co. Limited ("Peters & Co.") as its exclusive financial advisor to coordinate all aspects of this process and Peters & Co. will act as the sole contact for all parties ("Interested Parties") who have expressed an interest in Petromanas or Petromanas' assets (the "Assets"). An online virtual data room has been established. This data room provides a comprehensive technical description of the Assets, as well as detailed operational information. The virtual data room can be accessed at any time.
Petromanas and Peters & Co. expressly reserve the right at any time to amend or terminate these sale procedures, to decline to permit an Interested Party to participate in the process, to terminate discussions with any or all Interested Parties, to reject any or all offers, or to negotiate with any party with respect to a possible transaction. Online data rooms will be open the second week of October 2014.
Contacts
Peters & Co. will act as the sole contact for all Interested Parties. The directors, officers and employees of Petromanas should not be contacted directly. All communications and inquiries from Interested Parties should be directed to one of the representatives listed below:
J.G. (Jeff) Lawson Principal, Corporate Finance
(403) 261-2298 [email protected] Steve R. Woima Principal, Head Acquisitions & Divestitures
(403) 261-2264 [email protected] Benjamin M. Gazdic Analyst, Corporate Finance
(403) 261-2228 [email protected] Peters & Co. Limited 2300 Jamieson Place 308 Fourth Avenue SW Calgary, Alberta, Canada T2P 0H7
Disclaimer
This Information Memorandum is based on information provided by Petromanas from its own records and from other sources. The Information Memorandum is being distributed, on behalf of Petromanas, by Peters & Co., the Company's exclusive financial advisor, solely for the use by certain qualified Interested Parties. The sole purpose of the Information Memorandum is to assist Interested Parties in determining whether or not to proceed with further investigation of a potential transaction involving Petromanas or its Assets ("Transaction"). The information contained herein (the "Information") has been prepared in good faith to assist Interested Parties in completing their own independent evaluation of the Assets, but does not purport to be all inclusive or to contain all of the information that an Interested Party may desire or that may be required by an Interested Party to properly evaluate the Assets. In all cases, the Interested Parties should conduct their own independent investigation and analysis of the Assets and the data set forth in this Information Memorandum.
Peters & Co. has not independently verified any of the Information contained herein. Neither Peters & Co., the Company nor their respective affiliates make any representation or warranty (expressed or implied) as to the accuracy or completeness of this Information Memorandum.
Neither Peters & Co., the Company nor their respective affiliates will assume any liability for the Interested Parties' use of this Information Memorandum or any other oral, written or other communication transmitted to the Interested Party during the course of its evaluation of the Assets.
Petromanas and Peters & Co. expressly disclaim any and all liability and responsibility for and associated with the quality, accuracy, completeness or materiality of the Information.
The Interested Party will conduct its own independent evaluation and analysis of the Information and satisfy itself as to the quality, accuracy, completeness and materiality of the same. The Interested Party will rely solely on its own independent evaluation and analysis of the Information when deciding whether or not to submit a proposal, enter into a definitive agreement and consummate a Transaction.
This Information Memorandum may include certain statements, estimates, forecasts and projections provided by and with respect to the anticipated future performance of the Assets. Such statements, estimates, forecasts and projections reflect various assumptions made by the Company and/or Peters & Co. concerning anticipated results, which may or may not prove to be correct. No representations or warranties are made as to the accuracy of such statements, estimates, forecasts or projections. The only Information that will have any legal effect will be that specifically represented or warranted in a definitive purchase agreement, when, as and if executed, with respect to a possible Transaction and executed on behalf of the Company and the purchaser or investor.
NEITHER THIS INFORMATION MEMORANDUM NOR ITS DELIVERY TO AN INTERESTED PARTY SHALL CONSTITUTE OR BE CONSTRUED TO BE AN OFFER TO SELL ANY SECURITIES OF THE COMPANY. THIS INFORMATION MEMORANDUM SHALL NOT BE DEEMED AN INDICATION OF THE STATE OF AFFAIRS OF THE COMPANY NOR CONSTITUTE ANY INDICATION THAT THERE HAS BEEN NO CHANGE IN THE BUSINESS OR AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF.
