Cerus enters financing agreement for Pennant project

2017-08-02 11:14 ET - News Release

Mr. Mackenzie Loree reports
DFP 1701001 PENNANT SASKATCHEWAN FUNDING & OPERATIONAL UPDATE
Cerus Energy Group Ltd., further to the news release dated March 31, 2017, has entered into an agreement with Vital Energy Inc.
Cerus has reached an agreement with Lomac Canada Ltd., a wholly owned subsidiary of Cerus, for the syndicated financing of the phase 1 developments of the Pennant, Sask., development finance platform (DFP). The syndication will be financed through a combination of secure debt, credit and cash from arm's-length and non-arm's-length lenders.

The Lomac Canada syndicate will be awarded 160 per cent of the 180-per-cent penalty, in addition to the retention of collected revenue until penalty payout. Cerus will retain a 20-per-cent margin on the project and the 5-per-cent GORR (gross overriding royalty) for its transaction facilitation and oversight. According to R. Mackenzie Loree, president and chief executive officer Cerus: "We are very close to achieving the goals that have been set out for Cerus and the initiation of our DFP. The creation of a platform that can fund development operations on an ongoing basis, without requiring dilution or issuance of debt in Cerus, is key to our continued success."

The Vital Pennant project will clearly highlight the effectiveness of the platform by creating opportunity for the developing company, while also providing a handsome return for Cerus. It will also provide a safe and secure opportunity for syndicated member participation. The company appreciates the patience of its shareholders, as the DFP platform and model have required significant time and effort to establish and implement through this inaugural project.

The Vital Pennant project will be the standard by which the effectiveness and success of the platform's performance will be gauged. The Vital Pennant project has a minimum of 80 locations identified with additional locations expected to be booked with the completion of phase 3 seismic project analysis. Based on the booked locations, the project has $112-million committed to development, excluding pipelines or centralized processing facilities. The total penalty amount will be in excess of $201.6-million, with a retained margin of $40.32-million earned by Cerus.  In summary, Cerus aims to cut its teeth on this first project with Vital and then replicate the success of the system. As aggressively as possible, the company will use its own cash flow and money, raised through the syndication program, to quickly deploy and develop projects. Cerus is confident that lenders and participants in this project will not only become confident in the reliability and repeatability of the program, but also in the management team's vision, platform and project oversight abilities.

Operational update
Three of four surface leases have been successfully acquired, with construction of the first surface lease expected to commence within the next two weeks. The company will be waiting on preferred services to begin the drilling process along with the completion of Lomac Canada's syndicate membership.

About Cerus Energy Group Ltd.
Cerus is an oil and gas exploration company with property assets in both Alberta and Saskatchewan.
We seek Safe Harbor.