SDX Energy Inc. ("SDX" or the "Company") - Proposed acquisition of producing assets in Egypt and Morocco - Accelerated Bookbuild to raise approximately US$40 million

Background to and reasons for the acquisition and fundraising (CNW Group/SDX Energy Inc.)

THIS ANNOUNCEMENT (INCLUDING THE APPENDIX) AND THE INFORMATION CONTAINED HEREIN IS RESTRICTED AND IS NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, IN WHOLE OR IN PART, DIRECTLY OR INDIRECTLY, IN, INTO OR FROM THE UNITED STATES,  AUSTRALIA, JAPAN, SOUTH AFRICA OR ANY OTHER JURISDICTION IN WHICH SUCH RELEASE, PUBLICATION OR DISTRIBUTION WOULD BE UNLAWFUL.           

FURTHER, THIS ANNOUNCEMENT IS MADE FOR INFORMATION PURPOSES ONLY AND DOES NOT CONSTITUTE AN OFFER TO SELL OR ISSUE OR SOLICITATION TO BUY, SUBSCRIBE FOR OR OTHERWISE ACQUIRE COMMON SHARES IN SDX IN THE UNITED STATES, CANADA, AUSTRALIA, JAPAN, SOUTH AFRICA OR ANY OTHER JUSRISDICTION IN WHICH ANY SUCH OFFER OR SOLICITATION WOULD BE UNLAWFUL.  THE SECURITIES OF SDX HAVE NOT BEEN AND WILL NOT BE REGISTERED UNDER THE US SECURITIES ACT OF 1933 AS AMENDED (THE "SECURITIES ACT"), OR QUALIFIED FOR SALE UNDER THE LAW OF ANY STATE OR OTHER JURISDICTION OF THE UNITED STATES AND MAY NOT BE OFFERED OR SOLD IN THE UNITED STATES EXCEPT PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. THE COMPANY DOES NOT INTEND TO REGISTER ANY SECURITIES UNDER THE SECURITIES ACT, AND NO PUBLIC OFFERING OF SECURITIES IN THE UNITED STATES WILL BE MADE.

THE INFORMATION CONTAINED WITHIN THIS ANNOUNCEMENT IS DEEMED BY SDX TO CONSTITUTE INSIDE INFORMATION AS STIPULATED UNDER THE MARKET ABUSE REGULATION (EU) NO. 596/2014 ("MAR"). ON THE PUBLICATION OF THIS ANNOUNCEMENT VIA A REGULATORY INFORMATION SERVICE ("RIS"), THIS INSIDE INFORMATION IS NOW CONSIDERED TO BE IN THE PUBLIC DOMAIN.

LONDON, Jan. 24, 2017 /CNW/ - SDX Energy Inc. (TSXV, AIM: SDX), the Egypt focused oil and gas company, is pleased to announce that it has entered into heads of terms, and is finalising a Sale and Purchase Agreement, to acquire a portfolio of oil and gas production and exploration assets in Egypt and Morocco, which are currently held by Circle Oil plc ("Circle") for a total cash consideration of US$30 million, subject to working capital adjustment (the "Acquisition"). On completion of the Acquisition, the Company anticipates that its total net working interest production will increase by over 247 per cent. to approximately 4,705boepd, and its net working interest 2P reserves will grow by 64 per cent. to 12.03 MMboe.

The Acquisition is to be funded through a conditional placing of new Common Shares in SDX at a Placing Price of 30 pence (C$0.50) per Placing Share (the "Placing") and a simultaneous direct subscription of new Common Shares at the Placing Price (the "Subscriptions") to raise gross proceeds of approximately US$40 million (together the "Fundraising"). The Placing is being conducted through an accelerated Bookbuild which will be launched immediately following this Announcement in accordance with the terms and conditions set out in Appendix I to this Announcement. Cantor Fitzgerald, GMP FirstEnergy and Stifel are acting as joint bookrunners in connection with the Placing. GMP FirstEnergy is acting as financial adviser in connection with the Acquisition.

Highlights

The Acquisition

• The Company has entered into an exclusive non-binding heads of terms and is in advanced negotiations for it (or its subsidiaries) to acquire two subsidiaries of Circle, debt free, following a strategic review process by Circle. These subsidiaries together hold a portfolio of producing oil and gas assets in Egypt and Morocco.
  
  
  • In Egypt, the Company will acquire a 40 per cent. interest in the NW Gemsa concession, in which it currently holds a 10 per cent. interest, which will add net working interest production of approximately 2,600 boepd and net working interest 2P reserves of 3.8 MMboe to the SDX portfolio.
    
    
  • In Morocco, the Company will acquire a 75 per cent. interest in both the Sebou and Lalla Mimouna concessions (as described in the Table 2 shown in pdf), which will add net working interest production of approximately 4.5 MMscf/d (750 boepd) and net working interest 2P reserves of approximately 0.9 MMboe to the SDX portfolio.
    
    
  • A review of Reserves and Resources for Circle Oil Maroc's assets in accordance with Canadian National Instrument NI 51-101 and the COGE Handbook has been prepared by Evolution Resources SA. A copy of this statement is on SDX's website at www.sdxenergy.com.
    
    
  • In addition, as part of the acquisition, the Company will acquire a positive net working capital position of approximately US$18.3 million, comprising approximately US$16.4 million in receivables less payables and approximately US$1.9 million in cash. This net working capital is allocated c. US$14.5 million in Egypt and c. US$3.8m in Morocco.
    
    
• The Company's ability to enter into this acquisition is dependent on it raising sufficient funds to pay the anticipated purchase price of US$30million. Subject to the Fundraising securing sufficient gross proceeds, the Company anticipates entering into the SPA on or prior to Admission with completion taking place on the day of Admission, which is expected to occur at 8 a.m. on 27 January 2017. If this timetable changes and Admission is delayed, an announcement will be made via a RIS. It is a condition of the Fundraising that the SPA is entered into no later than Admission. Following the signing and completion of the Acquisition, the Company anticipates that it will increase its total net working interest production by 247 per cent. to approximately 4,705 boepd, and its net working interest 2P reserves by 64per cent. to 12.03 MMboe.
  
  
• The acquisition price of $30 million, before adjustments, represents approximately 39 cents in the dollar on Circle's total group debt of approximately US$77.5 million as at 30 June 2016. The Acquisition is in accordance with the Company's strategy to pursue distressed production and development opportunities in North Africa alongside organic growth, as it seeks to build its portfolio to net production of approximately 25,000 to 30,000 boepd while also diversifying the overall portfolio to a new jurisdiction.

Fundraising

• The Placing and Subscriptions are expected to raise gross proceeds of up to approximately US$40 million, which will be used to fund the Acquisition, the replacement of work programme bonds in Morocco, associated working capital and the costs of the Placing and the Acquisition.
  
  
• The Placing and Subscriptions are conditional upon, amongst other things, the entry into the SPA prior to Admission and Admission, which is expected to occur on 27 January 2017 but by no later than 28 February 2017.
  
  
• Appendix I to this Announcement sets out further information relating to the Placing including the terms and conditions of the Placing.
  
  
• Directors' and major Shareholder intentions
  
  
• Certain directors and key management of SDX and major Shareholders together comprising approximately 29 per cent. of the Existing Common Shares as at the date of this Announcement have indicated their intention to subscribe for new Common Shares at the Placing Price following publication of this Announcement. The details of these Subscriptions will be announced separately in due course.

About SDX
SDX is an international oil and gas exploration, production and development company, headquartered in London, England, UK, with a principal focus on Egypt.  In Egypt, SDX has an interest in two production concessions: NW Gemsa and West Gharib (Meseda) both located in the Eastern Desert. SDX's portfolio also consists of South Ramadan, a development asset in the Gulf of Suez and South Disouq, an exploration asset in the Nile Delta.  For further information, please see the website of the Company at www.sdxenergy.com or the Company's filed documents at www.sedar.com.

Neither 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.

SOURCE SDX Energy Inc.

SDX Energy Inc., Paul Welch, President and Chief Executive Officer, Tel: [phone]; Mark Reid, Chief Financial Officer, Tel: [phone]; Cantor Fitzgerald Europe (Nominated Adviser & Joint Bookrunner), Sarah Wharry/Craig Francis, Tel: [phone]; GMP FirstEnergy Capital LLP (Financial Adviser & Joint Bookrunner), Jonathan Wright/David van Erp, Tel: [phone]; Stifel Nicolaus Europe Limited (Joint Bookrunner), Ashton Clanfield/Callum Stewart, Tel: [phone]; Celicourt (PR), Mark Antelme/Joanna Boon, Tel: [phone]