US Oil Sands Inc. Announces Financing, PR Spring Project Update, Board Changes and Voluntary Delisting from the TSX Venture Exchange
US Oil Sands Inc. ("US Oil Sands" or the "Company") (TSX VENTURE:USO), an innovator of oil extraction technologies, announces that it has entered into a non-binding letter of intent with ACMO S.à R.L. ("ACMO"), the Company's largest shareholder, for a US$5 million senior secured convertible loan facility (the "Loan Facility") to fund the remaining PR Spring Project (the "Project") start-up costs and to provide working capital for the Company (the "Financing").
In conjunction with the Financing, the Company will be seeking to obtain from a majority of disinterested shareholders written consent for the Financing and the delisting of the common shares of the Company from the TSX Venture Exchange (the "Exchange"). If a majority of disinterested shareholders do not provide their consent in a timely manner, the Board will likely approve seeking creditor protection as management and the Board of Directors believe that the Company has exhausted all other financing alternatives. The Board and management expect that under any such creditor protection proceedings, the shareholders of US Oil Sands would experience greater dilution than under the terms contemplated by the Financing and it is possible that all existing equity holdings in the Company may be extinguished.
The Loan Facility consists of US$2.5 million available on closing and a further US$2.5 million available upon the Project producing 500 barrels per day of oil for five consecutive days. The Loan Facility will rank pari passu with the Company's US$7.5 million loan (the "Existing Loan"), will not bear any interest and will mature 10 years from the closing date. At any time between the closing date and maturity, the Loan Facility may be convertible into that number of common shares of the Company that provides ACMO with 90% of the Company's fully diluted common shares outstanding when combined with its existing share holdings. ACMO currently holds 31% of the Company's common shares and 58% on a fully diluted basis when including the 24 million warrants issued in connection with the January 2017 financing transaction. Pursuant to the Loan Facility transaction, ACMO will cancel the aforementioned 24 million warrants.
The policies of the Exchange do not permit the completion of the Loan Facility on the terms currently contemplated due to, among other things, the conversion rights attached to the Loan Facility. Therefore, the Company is seeking the consent of a majority of disinterested shareholders to a voluntary delisting of the common shares from the Exchange in order to proceed with the Loan Facility.
In conjunction with the Financing, the Existing Loan will be amended so that its repayment date will be extended to January 12, 2019, interest payable in respect of the Existing Loan will be reduced to zero percent per annum and all accrued and unpaid interest will be forgiven.
Upon closing, the Company will reconstitute its Board of Directors such that the number of directors will decrease from five to three, each of which will be nominees of ACMO.
Completion of the Financing is subject to negotiation of definitive agreements which will require final Board approval and satisfaction of the conditions therein.
Application will be made to the Exchange to delist the Company's common shares from trading on the Exchange subject to obtaining written consents from a majority of disinterested shareholders. ACMO is the only shareholder who has an interest in the Financing and will be excluded from providing consent for purposes of satisfying this condition. The Company has prepared a form of shareholder consent letter and will be contacting shareholders to obtain their written consent
PR SPRING PROJECT UPDATE
This past week for the first time, the Company introduced oil sands into the PR Spring extraction plant, as the damaged decanting centrifuge has been repaired, replaced and tested. The plant is now in the final stage of start-up and working through normal start-up issues and challenges.
ABOUT US OIL SANDS INC.
US Oil Sands is engaged in the exploration and development of oil sands properties and, through its wholly owned United States subsidiary US Oil Sands (Utah) Inc., has a 100% interest in bitumen leases covering 32,005 acres of land in Utah's Uinta Basin. The Company plans to develop its oil sands properties using its proprietary extraction process which uses a bio-solvent to extract bitumen from oil sands without the need for tailings ponds. The Company is in the pre-production stage, anticipating the commencement of bitumen production and sales once it has completed start-up of the Project.
SOURCE: US Oil Sands Inc.
The Toronto Stock Exchange has neither approved nor disapproved the information contained herein.