Pursuing and developing exploration project opportunities in Latin America

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Reorganization and Asset Acquisitions

The Reorganization

Petro-Victory Energy Corp., Petro-Victory, LLC and the Former Unit holders entered into the Contribution Agreement, which sets forth the terms and conditions pursuant to which the Company acquired all of the issued and outstanding units of Petro-Victory, LLC in exchange for the issuance to the Former Unit holders of an aggregate of 128,800,000 Common Shares and Restricted Voting Shares. Immediately following the Reorganization, but prior to giving effect to the Offering or Asset Acquisitions, there was an aggregate of 128,800,000 Common Shares and Restricted Voting Shares issued and outstanding.

The Asset Acquisitions

Pursuant to the Asset Acquisitions, the Company may acquire the exploration rights to the Takutu PPL and Block REC-T-170. The Company has entered into Purchase and Sale Agreements with respect to the Brazil Acquisition and the Guyana Acquisition pursuant to which it issued 15,600,000 Performance Shares in respect of each such Asset Acquisition on Closing of the Offering, for a total issuance of 31,200,000 Performance Shares. All of such Performance Shares are held in escrow following issuance, pending the successful completion of the Asset Acquisitions. The Purchase and Sale Agreements contain certain conditions precedent required to be satisfied in order to complete the Asset Acquisitions. It is possible that the Company could complete either, neither or both of the Asset Acquisitions. If the conditions precedent for either of the Asset Acquisitions are not completed by May 22, 2015, the Purchase and Sale Agreement with respect to such Asset Acquisitions will automatically terminate and the Performance Shares will be cancelled and returned to the Company’s treasury. The conditions precedent, which generally apply to both of the Asset Acquisitions, unless noted otherwise, are the following:

  • Obtaining all necessary third party consents to the transfer of the relevant assets, the waiver of all pre-emption or preferential rights by such third parties and the execution of assignment documents by such third parties; 

  • Receiving the approval by relevant governmental authorities for the transfer of the relevant assets and the operator-ship of the relevant assets, including, in the case of the Brazil Acquisition, the approval of the ANP, which approval may require the Company to demonstrate that it has the financial capability to fund the next exploration phase of the concession; 

  • Receiving the renewal of the concession in Brazil and Guyana for a period of not less than two years; 

  • Receiving the confirmation from the relevant government agencies that any outstanding work program has been completed in the relevant concession;

  • In the case of Brazil, the drilling, at the cost and risk of the seller of such assets, of a well targeting the Fazenda Buril multi-zone prospect with certain defined objectives;

  • The completion, to the Company’s satisfaction, of due diligence of the relevant assets; 

  • The written agreement of the Company that the documentation at closing includes all relevant documents necessary for the Company to enjoy all relevant rights to the relevant assets; and 

  • The completion of the Offering.

Immediately following the completion of the Reorganization and the Asset Acquisitions, the Company’s principal subsidiaries, together with their respective jurisdictions of incorporation and property interests (if any) are as follows:

 

 

 

Notes:

  1. Certain of the Former Unit holders received a combination of Common Shares and Restricted Voting Shares in connection with the Reorganization. The Vendors received Performance Shares in connection with the Asset Acquisitions.

  2. Richard F. Gonzalez owned one percent of the outstanding shares in PHSRL. Mr. Gonzalez agreed to transfer his shares in PHSRL to the Company, which the Company completed prior to the Closing.

  3. President Energy has earned a 59 percent working interest under the Pirity Farm-Out. A third party, LCH, owns a 5 percent working interest. President Energy acquired LCH on June 10, 2014. All of the working interests, including the Company’s 36 percent working interest, are subject to a 5 percent gross overriding royalty interest.

  4. Upon completion of the Guyana Acquisition, the Company will have a 100 percent working interest on the property and the resources which is subject to a 10 percent private carried working interest regarding the first well, which is held by a third party. The Company expects to form a subsidiary in Guyana to hold these assets.

  5. Subject to completion of the Brazil Acquisition, the Company will have a 50 percent working interest in the shallow formations and a 10 percent working interest in the deep formations. A third party has a 5 percent gross overriding royalty interest. The Company expects to form a subsidiary in Brazil to hold these assets.