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Oryx Petroleum 2016 Financial and Operational Results

15 March 2017

Calgary, Alberta, March 15, 2017

Full Payment for Oil Export Sales through February 2017 and Reduced Costs; Major Shareholders have conditionally agreed to equity funding of $30 million

Oryx Petroleum Corporation Limited (“Oryx Petroleum” or the “Corporation”) today announces its financial and operational results for the year ended December 31, 2016. All dollar amounts set forth in this news release are in United States dollars, except where otherwise indicated.

2016 Financial Highlights:

• Total revenues of $22.8 million on working interest sales of 593,300 barrels of oil (“bbl”) and an average realised sales price of $34.61/bbl for 2016
  - The Corporation has received full payment in accordance with production sharing contract entitlements for all oil sale deliveries into the Kurdistan Export Pipeline during 2016
• Operating expenses of $12.6 million ($21.28/bbl) and a negative Oryx Petroleum Netback of $0.54/bbl
  - 37% decrease in operating expenses in both absolute and per barrel terms versus 2015
  - Oryx Petroleum Netback1 of $6.37/bbl in Q4 2016 versus $4.59/bbl in Q3 2016
• General and administrative expenses of $9.4 million
  - 30% reduction versus 2015
  - 36% reduction in headcount versus year end 2015
• Net loss of $65.7 million ($0.31 per common share)
• Net cash used in operating activities was $11.5 million versus $22.0 million in 2015 including negative Operating Cash Flow of $9.2 million and a $2.3 million increase in non-cash working capital
• Net cash used in investing activities was $34.7 million including payments related to drilling and facilities work in 2016 in the Hawler license area, the finance lease obligation related to the Demir Dagh production facilities, technical support costs and payments for capital investment in prior periods 
• $40.7 million of cash and cash equivalents as of December 31, 2016 

2016 Operations Highlights: 

• Gross (100%) oil production of 904,000 bbl (working interest 588,000 bbl) for the year ended December 31, 2016 versus gross (100%) oil production of 922,000 bbl (working interest 599,000 bbl) for the year ended December 31, 2015
  - Average gross (100%) oil production of 2,500 bbl/d (working interest 1,600 bbl/d) for the year ended December 31, 2016
  - Commencement of sales via pipeline on March 14, 2016
  - Successful re-completion of the Zey Gawra-1 well in the Cretaceous reservoir
• Gross (working interest) proved plus probable oil reserves of 202 million barrels as at December 31, 2016 versus 238 million barrels as at December 31, 2015

2017 Operations Update: 

• Average gross (100%) oil production of 2,900 bbl/d and 3,100 bbl/d in January and February 2017, respectively
  - The Corporation has received full payment in accordance with production sharing contract entitlements for all oil sale deliveries into the Kurdistan Export Pipeline for the months of January and February 2017
• Completed acquisition of 1,921 km2 of 3D seismic data in the AGC Central license area

2017 Forecasted Work Program and Capital Expenditures: 

• 2017 capital expenditure forecast of $45 million (versus $94 million budget). Most expenditures will be dedicated to the Hawler license area in the Kurdistan Region of Iraq with the development of the Zey Gawra field the key focus. Forecast activities consist of:
  - Four wells to be spudded at the Zey Gawra field in 2017 with associated field infrastructure
  - Re-completion of the Demir Dagh-8 well targeting the Cretaceous reservoir
  - Processing of recently acquired 3D seismic data covering a portion of the AGC Central license area
• The Corporation expects the four Zey Gawra wells and the re-completion of the Demir Dagh-8 well to enable it to achieve production and cash flow levels that will fund its operations and allow it to meet its obligations

Proposed Shareholder Funding and Balance Sheet Restructuring: 

• The Addax and Oryx Group P.L.C. (“AOG”) and Zeg Oil and Gas Ltd (“Zeg Oil”) have conditionally agreed to subscribe for approximately 90 million shares of the Corporation for cash consideration of $30 million (the “Shareholder Subscription”)
• AOG has conditionally agreed to extinguish $24.1 million of the outstanding principal and interest due under the AOG Credit Facility, representing 25% of that facility as of December 31, 2016, in consideration for approximately 72 million common shares of the Corporation. The maturity date of the remaining balance due of $72.4 million (as of December 31, 2016) is proposed to be extended from March 2018 to July 2019 (collectively, the “AOG Credit Facility Restructuring”)
• Completion of the above transactions will be subject to finalization and execution of definitive agreements, acceptance of the Toronto Stock Exchange, approval of shareholders (excluding AOG and Zeg Oil), restructuring of the contingent consideration obligation and certain other obligations on terms satisfactory to AOG and Zeg Oil, and other customary conditions
• Negotiations with the vendor of the Hawler license area with regards to the contingent consideration obligation are ongoing but have yet to produce an agreement 
• All share issuances in connection with the aforementioned agreements are proposed to be based on an Oryx Petroleum share price of C$0.45 per common share and the Bank of Canada Canadian Dollar-United States Dollar noon rate on March 14, 2017, being 0.7428
• Pro forma for the closing of the Shareholder Subscription and AOG Credit Facility Restructuring the Corporation would have approximately 431 million shares outstanding of which AOG and Zeg Oil would own 61% and 25%, respectively 
• The Shareholder Subscription and AOG Credit Facility Restructuring are expected to close in June 2017 provided final agreements are reached and conditions satisfied
• Definitive agreements have not yet been executed and it is uncertain if final agreements can be reached. If definitive agreements are entered, the transactions may nonetheless fail to be completed if any of the conditions to closing fail to be satisfied
• On March 15, 2017 the Corporation issued 15.5 million shares to a contractor to settle a $4.8 million trade payable.

Liquidity Outlook:

• The Corporation expects cash on hand as of December 31, 2016, expected proceeds from the anticipated Shareholder Subscription, and cash receipts from net revenues and export sales exclusively through the pipeline, will allow it to fund its forecasted cash expenditures and operating and administrative costs and to meet its obligations into the first half of 2018. Without the proceeds from the anticipated Shareholder Subscription Oryx Petroleum would be unlikely to be able to continue development of the Hawler license area and the Corporation would be required to consider divestiture or relinquishment of the license area.

CEO’s Comment
Commenting today, Oryx Petroleum’s Chief Executive Officer, Vance Querio, stated:
“2016 was a year of transition for Oryx Petroleum. We completed the restructuring of our organisation, reducing its cost dramatically, and have focused our remaining resources on core assets. We welcomed a strategic investor, Zeg Oil, who provided us with funding for our capital program and operations. In March we began delivering all of the Hawler Area production to the Kurdistan Export Pipeline at Demir Dagh, with such sales largely uninterrupted and all invoices paid for 2016. In the Hawler license area, we shifted our near term focus to the Zey Gawra field and in December 2016 we began exploration activities in AGC Central, our most promising license area in West Africa, with the acquisition of 3D seismic data.
With the success of the Zey Gawra-1 recompletion we have developed and are starting to implement a capital program focused primarily on the Zey Gawra field in the Hawler license area. The program includes four new wells at the Zey Gawra field and the recompletion of the Demir Dagh-8 well. A successful recompletion of the Demir Dagh-8 well, high in the Cretaceous reservoir, will provide important validation of our horizontal well development plan for the Demir Dagh Cretaceous reservoir. We expect our program will provide us with production and cash flow by early 2018 that can sustain our operations and allow us to meet our obligations.
In order to create the liquidity and financial flexibility needed to execute our capital program and fund our operations we have been working to restructure key liabilities and secure equity funding from our shareholders. To that end we have recently satisfied a significant trade payable with the issuance of common shares, and AOG and Zeg Oil have conditionally agreed to subscribe for additional common shares. The agreed equity subscriptions by AOG and Zeg Oil are conditioned upon the satisfactory restructuring of the contingent consideration obligation related to the Hawler license area and certain other obligations on terms satisfactory to AOG and Zeg Oil.”
With our organisational restructuring now complete, we look forward to finalising our balance sheet recapitalisation and implementing our 2017 plans for continued appraisal, development and exploration of our core assets.”