Petrus Announces Strategic Acquisition of Cardium Assets in Ferrier

Source: 3/1/2022, Location: North America

Petrus Resources Ltd. has entered into a definitive agreement (the "Agreement") to acquire a privately owned limited partnership (the "LP") and its general partner (the "GP", and together, the "Acquired Entities") for total consideration of approximately $14.4 million, consisting of 10 million common shares of the Company (the "Shares") issued at a deemed price of $1.44 per Share based on the volume weighted average trading price of the Shares on the Toronto Stock Exchange ("TSX") for the five trading days prior to the date of the Agreement (the "Acquisition"). The Acquisition is expected to close in early March and is subject to customary closing conditions, including the approval of the TSX.

Acquisition Highlights
The Acquired Entities' assets are focused in Petrus' core area, Ferrier, Alberta. Through the Acquisition, Petrus will receive a contiguous, high working interest, Cardium land position in Ferrier; an area where the vast majority of mineral rights are leased and most acreage positions are secured through corporate sale transactions. The proximity of the acquired lands to Petrus’ existing Ferrier assets will allow current and future production from the assets to be tied into Petrus’ owned and operated gathering and processing infrastructure, which is expected to provide considerable operating and cost synergies. The Acquisition provides Petrus with an exceptional opportunity to leverage its expertise successfully drilling low-risk, low-cost, high return wells in this area.

Highlights of the Acquisition include:
- Strategic consolidation of quality Cardium assets at Ferrier
- A high working interest, undeveloped Cardium land position in 8 net sections of land directly offsetting Petrus’ core development in Ferrier
- Meaningful drilling inventory of an estimated 40 gross unbooked drilling locations1, the majority of which have been internally identified by Petrus as Tier 1 locations
- Stable base production of 425 boe/d2 (83.0% conventional natural gas, 13.5% NGLs and 3.5% light oil) with an estimated annual decline rate of 10%3
- Potential to materially reduce operating costs through development and utilization of Petrus’ owned and operated infrastructure
- Attractive type curve economics at US$80/bbl WTI and $4.00/Mcf AECO

Related Party Matters
The Acquisition is a related party transaction under applicable securities legislation as, among other things, the Acquired Entities are managed and directed by Ken Gray, the President and Chief Executive Officer of both the GP and Petrus, and Ken Gray and two of Petrus' controlling shareholders (Stuart Gray and Glen Gray) own or control, in aggregate, approximately 69.5% of the LP's units and 50% of the GP's shares. The board of directors of Petrus (the "Board") established a committee of independent and disinterested directors of Petrus (the "Independent Committee"), comprised of Don Cormack, Patrick Arnell and Peter Verburg, to review and recommend approval of the Agreement and the Acquisition to the Board. The Board, with Ken Gray and Don Gray abstaining, approved the Agreement and the Acquisition based on, among other things, the recommendation of the Independent Committee, their review and assessment of an independent reserves report prepared by GLJ Ltd. effective December 31, 2020 and mechanically updated to November 30, 2021 evaluating the reserves volumes and net present values of the Acquired Entities, and the advice received from the Company's financial advisor for the Acquisition.

The Acquisition is exempt from the formal valuation and minority shareholder approval requirements of applicable securities legislation as neither the fair market value of the subject matter of, nor the fair market value of the consideration for, the Acquisition, insofar as it involves interested parties, exceeds 25% of the Company's market capitalization.

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