CEO.CA Chairman's Briefing

TORONTO, ONTARIO--(Marketwired - April 27, 2017) - PetroMaroc Corporation plc (TSX VENTURE:PMA), an independent oil and gas company focused on Morocco (the "Company" or "PetroMaroc") is pleased to announce its financial and operating results for the year ended December 31, 2016, and the fourth quarter of 2016.

Commenting, D. Campbell Deacon, Chief Executive Officer of PetroMaroc, said: "During 2016, the Company announced and significantly advanced the binding sale and purchase agreement with Sound Energy plc ("Sound Energy"). In early January 2017, the Company announced all conditions precedent were successfully fulfilled with the transaction completing, following which, PetroMaroc's consideration shares in Sound Energy enable the Company to be positioned to leverage off Sound Energy's operating capability in country and balance sheet whilst retaining material upside with the Sidi Moktar Net Profit Interests. We look forward to the near-term testing of Kechoula by Sound Energy - a rig is being mobilised to Sidi Moktar, and is expected to arrive in May 2017, upon which, Sound Energy will re-enter and test the two existing wells on the Kechoula discovery which, subject to initial well results, may include a side-track and an extended well test thereafter." "During 2016, the Company successfully restructured the Cdn $11.09 million principal amount of secured debentures, which were rolled into a new class of secured redeemable, debentures, issuable in series, with all principal and interest due and payable in full on January 31, 2018. Through 2016, monthly general and administrative costs totalled US$0.14 million, representing a 10% decrease in comparison to 2015 (US$0.16 million) and a 43% decrease in comparison to 2014 (US$0.25 million). During 2016, the Company secured the release of the US$2.5 million Sidi Moktar bank guarantee restricted cash, disposed of surplus inventory, and closed a Cdn$0.39 million secured non-convertible debenture financing."

PetroMaroc exited 2016 with cash of US$2.1 million and a working capital deficit as at December 31, 2016 of US$0.2 million (excluding the secured debentures, excluding the secured debenture accrued interest and fees, excluding the unsecured loan and interest, including restricted cash). 

During 2016, the Company carefully reviewed its secured debentures, and equity capital. In late 2016, following shareholder approval, the Company successfully restructured the Cdn $11.09 million principal amount of secured debentures (the "Debentures"), with the Debentures being rolled into a new class of secured redeemable, debentures, issuable in series, with all principal and interest due and payable in full on January 31, 2018. 

The Company continued its discussions with its Sidi Moktar creditors to negotiate settlement of the remaining unpaid costs in respect to the Sidi Moktar drilling campaign. Subsequent to the year-end the Company successfully executed settlement agreements with a significant proportion of its unsecured creditors, and the Company continues to engage with the remaining unsecured creditors to execute settlement agreements.

PetroMaroc today filed its annual financial statements for the year ended December 31, 2016, together with its Management's Discussion and Analysis in respect of the Company's financial results for the year ended December 31, 2016. These documents are available on the PetroMaroc website at www.petromaroc.co or under the Company profile on SEDAR at www.sedar.com.

Highlights

Financial:

• Unrestricted cash as at December 31, 2016, of US$2.1 million (US$0.2 million as at December 31, 2015), US$0.5 million as at September 30, 2016.

• Working capital deficit as at December 31, 2016, US$0.2 million (excludes the Cdn$11.09 million secured debentures [& excludes Cdn $4.4 million accrued interest and fees as at December 31, 2016] which maturity date was extended from December 31, 2016 to January 31, 2018, excludes the Cdn$0.4 million unsecured loan [& accrued interest] which matured on December 31, 2016, includes US$0.6 million restricted cash).

• Secured full release of the US$2.5 million Sidi Moktar Bank Guarantee restricted cash in December 2016.

• Closed a Cdn$0.39 million secured debenture financing in June 2016, bearing interest at 15.0% per annum.

• Disposed of surplus inventory for proceeds of US$0.3 million in February 2016.

• The Company successfully restructured the Cdn $11.09 million principal amount of secured debentures, with the Debentures being rolled into a new class of secured redeemable, debentures, issuable in series (the "New Debentures"), with all principal and interest due and payable in full on January 31, 2018. The Series 1 New Debentures bear interest at the rate of 10% per annum and are convertible, at the option of the holder, into ordinary shares of the Company at a conversion price equal to $0.06 per share in the first 12 months of the term (January 1, 2017 to December 31, 2017) and $0.10 per share in the last month of the term (January 1, 2018 to January 31, 2018). The Series 2 New Debentures bear interest at the rate of 15% per annum, with no right to convert into ordinary shares of the Company. The Series 1 New Debentures and the Series 2 New Debentures shall bear an effective issue date of December 31, 2016, being the maturity date of the original Debentures. The Series 1 New Debentures and the Series 2 New Debentures shall rank pari passu with each other. In accordance with the terms of the New Debentures, the outstanding accrued interest and fees owing under the Debentures as at December 31, 2016 has been paid. The outstanding principal amount of the Series 1 New Debentures is Cdn $4,762,400 and the principal amount owing under the Series 2 New Debentures is Cdn $6,327,600. The Series 1 New Debentures are convertible into an aggregate of 79,373,333 ordinary shares, assuming a conversion price of $0.06 per share.

• Subsequent to the year-end, repaid the Cdn $0.4 million unsecured loan (& accrued interest) in January 2017.

• In February 2017, the Company disposed of 5,314,502 Sound Energy shares, to provide capital to meet its obligations of the Cdn $4,407,056 Debenture accrued interest and fees to the December 31, 2016 maturity date (Cdn $4,475,878 including the "stub" interest for the period January 1, 2017 to February 7, 2017 on the Debentures. The proceeds received (net of transaction costs, and net of proceeds above 50 pence being allocated equally between the Company and Sound Energy) totaled £3,841,555 (US $4,739,150). 

• Continued to engage with its unsecured creditors from the Sidi Moktar campaign. Subsequent to the year-end a number of settlement agreements were successfully executed, with ongoing focus with the residual unsecured creditors.

Operations:

• Sidi Moktar onshore:
  • In March 2016, executed a sale and purchase agreement with Sound energy, with Sound Energy acquiring the Company's Sidi Moktar licences in consideration for issuance to the Company 21,258,008 shares of Sound Energy with an estimated market value (at the grant price of 17.17 pence) of £3.65 million and the Company retaining a 10% net profit interest in any future cash flows from the Kechoula structure within the Sidi Moktar licences, and the Company retaining a 5% net profit interest in any future cash flows from structures within the Sidi Moktar licences other than the Kechoula structure.
  • Subsequent to the year-end, the transaction completed on January 9, 2017 with the Sound Energy shares closing at 75.75 pence per share. The proceeds from a sale (in whole or in part) of the 21,258,008 Sound Energy ordinary shares will be shared between PetroMaroc and Sound Energy, with PetroMaroc receiving all proceeds from sale(s) up to 50 pence per consideration share, and sale proceeds in excess of 50 pence per consideration share will be shared equally between PetroMaroc and Sound Energy.

• Zag onshore:
  • The Company committed to its percentage share of further geophysical studies and the drilling of one exploration well, subject to receiving and approving a satisfactory proposal from San Leon Morocco Limited (the "Operator"), as per the terms of the "First Extension Period" as set out in the petroleum agreement (the "Zag Petroleum Agreement") dated June 18, 2009 between Office National des Hydrocarbures et des Mines ("ONHYM"), the Operator and Longreach Oil and Gas Ventures Limited. Following the joint venture not completing the minimum work commitment of the First Extension Period, a twelve month extension to the First Extension Period was agreed by the joint venture, to May 2016. During the twelve month extension the Company continued to seek a mutually agreed technical, commercial and financial proposal to reduce its financial exposure insofar as possible. The Company has accrued US$1.2 million penalty costs based on its working interest in the joint venture as the joint venture has not met the minimum work commitments required by the licence and the operator has been notified of the same. The US$0.6 million of restricted cash lodged as a bank guarantee is available to offset this potential penalty. Subsequent to the year-end, in March 2017, ONHYM advised the Operator and the Company that the bank guarantee had been deemed forfeited, and in addition, that the joint venture should pay the residual penalty ($0.6 million net to the Company), to ONHYM. The Company has notified ONHYM that a "force majeure" has occurred pursuant to the Zag Petroleum Agreement due to financial, commercial and operational challenges on the licence over a number of years. The Company will seek to work with ONHYM and the Operator to expedite a mutually agreed resolution, however reserves the right to preserve its rights, which may include legal arbitration.
  • Previously capitalised costs, which were impaired in 2014, continue to remain impaired.

About PetroMaroc

PetroMaroc Corporation plc is an independent oil and gas exploration company. PetroMaroc holds a substantial share position in Sound Energy plc, and net profit interests in the Sidi Moktar licence (onshore Morocco), which the Company considers to be a committed long-term partner who will work to unlock the hydrocarbon potential of the Essaouira region. PetroMaroc is a public company and its common shares are listed on the TSX Venture Exchange under the symbol "PMA".

Special Note Regarding Forward-Looking Statements

This press release contains forward-looking statements. Such forward-looking statements relate to future events or the Company's future performance. All statements other than statements of historical fact are forward-looking statements. Forward-looking statements are often, but not always, identified by the use of words such as "may", "will", "should", "expect", "plan", "anticipate", "believe", "estimate", "predict", "project", "potential", "targeting", "intend", "could", "might", "continue" or the negative of these terms or other similar terms. Forward-looking statements in this press release include, but are not limited to, statements regarding the strength of the ongoing relationship between the Company and Sound Energy, including the ability of the Company to leverage off Sound Energy's operating capabilities in Morocco, the degree of success in connection with the proposed drilling of the Kechula structure to prove the commercial viability of Sidi Moktar and the value of the net profit interests held by the Company thereon, the ability of the Company to maintain cost reductions at current levels, the ability of the Company to continue to successfully negotiate settlement agreements with its trade creditors in respect to the Sidi Moktar drilling campaign, the value of Sound Energy shares held by the Company which may impact the ability of the Company to repay the principal and interest owing under the New Debentures on maturity, the ability of the Company to negotiate with ONHYM to reduce its potential exposure in respect of the Zag concession, the completion of evaluations and processing and interpretation of data, the performance characteristics of the Company's interests in oil and gas properties, capital expenditure programmes, supply and demand for oil, gas and commodities, prices for oil and gas, drilling plans, and realization of the anticipated benefits of acquisitions.

Forward-looking statements are only predictions. Forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause actual results or events to differ materially from those anticipated in such forward-looking statements. Some of the risks and other factors which could cause results to differ materially from those expressed in the forward-looking statements contained in this press release include, but are not limited to: unsuccessful test results to be conducted by Sound Energy in respect of the Sidi Moktar concession, the potential decline in the value of the shares in Sound Energy held by the Company which may impact upon the ability of the Company to repay the New Debentures on maturity, the general economic conditions in Canada, the Kingdom of Morocco and globally; industry conditions, including fluctuations in the price of oil and gas, governmental regulation of the oil and gas industry, including environmental regulation; fluctuation in foreign exchange or interest rates; risks inherent in oil and gas operations; political risk, including geological, technical, drilling and processing problems; unanticipated operating events which could cause commencement of drilling and production to be delayed; the need to obtain consents and approvals from industry partners, regulatory authorities and other third-parties; stock market volatility and market valuations; competition for, among other things, capital, acquisitions of reserves, undeveloped land and skilled personnel; incorrect assessments of the value of acquisitions or resource estimates; any future inability to obtain additional funding, when required, on acceptable terms or at all; credit risk; changes in legislation; any unanticipated disputes or deficiencies related to title matters; dependence on management and key personnel; and risks associated with operating in and being part of a joint venture.

Although the forward-looking statements contained in this press release are based upon factors and assumptions which management of the Company believes to be reasonable, the Company cannot assure that actual results will be consistent with its expectations and assumptions. Undue reliance should not be placed on the forward-looking statements contained in this news release as there can be no assurance that the plans, intentions or expectations upon which they are based will occur. These statements speak only as of the date of this press release, and the Company does not undertake any obligation to publicly update or revise any forward-looking statements except as expressly required by applicable securities laws.

Neither the TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.

This news release does not constitute an offer to sell or a solicitation of an offer to buy any securities of PetroMaroc in any jurisdiction in which such offer, solicitation or sale would be unlawful. The securities referred to herein have not been and will not be registered under the United States Securities Act of 1933 (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 (as defined in the U.S. Securities Act) unless registered under the U.S. Securities Act and applicable state securities laws, or an exemption from such registration is available.