Criterium Energy, an independent upstream energy development and production company focused in Southeast Asia, has executed a sale and purchase agreement ("SPA") to acquire all the issued and outstanding shares of Mont D'Or Petroleum Limited ("MOPL"). MOPL holds 100% operating working interests in two Production Sharing Contracts ("PSC") in Indonesia, the Tungkal PSC located onshore South Sumatra which produces 1,030 bbl/d and contains 2P Reserves of 4.6 MMbbl and the West Salawati PSC located in Southwest Papua that produces 20 bbl/d and contains 2P Reserves of 0.1 MMbbl. Collectively, Tungkal and West Salawati have been independently valued at US$58 million NPV101 after tax.

This transformative acquisition will establish Criterium as an operator in Southeast Asia while providing immediate production and operating cash flow. The Acquisition is aligned with Criterium's strategy of building a balanced portfolio of low-risk producing assets with tangible reinvestment opportunities in the form of production optimization, infill drilling, and step-out developments.

The Company has also filed and been receipted for a preliminary short-form prospectus in connection with a marketed agency equity public offering of subscription receipts of the Company at a price per Subscription Receipt to be determined in the context of the market, for aggregate gross proceeds of up to $22 million (US$16 million equivalent). The Offering is being led by Research Capital Corporation, as lead agent and sole bookrunner, on behalf of a syndicate of agents, including Canaccord Genuity Corp. and Stifel FirstEnergy.

Acquisition Highlights

• Immediate Cash Flow and Production: Collective production of approximately 1,050 bbl/d.
• Significant Upside Identified: Production optimization via workovers and infill drilling to achieve expected production of 1,400 - 1,600 bbl/d by Q4 2023/Q1 2024 and fiscal year-ended 2024 expected production of 2,200 - 2,600 bbl/d, funded from cash flow, with the expectation to generate US$25 million EBITDA in 2024.
• Mature Development and Exploration Inventory: 2C resource of 6.5 MMboe, including 20 bcf of natural gas and a mature prospect inventory near infrastructure. Total Prospective Resources of 29 MMboe.
• Established Operating Business: MOPL has a strong 15-year track record of safe operations in Indonesia and provides Criterium with a reputable and talented operating and technical team from which to expand operations.
• Assumption of Favourable Debt: Acquiring MOPL in consideration of assuming US$32.5 million of outstanding debt which Criterium will reduce to US$19.7 million post-closing through cash payments (US$7.9 million) and conversion to equity (US$2.5 million Common Shares at closing and US$2.4 million converted in 2025). Favourable weighted average interest rate of 7.9%.
• Strong Cash Position: Upon closing of the Acquisition, MOPL will hold a cash balance of approximately US$17 million (approximately US$8 million cash from the Offering and US$9 million of MOPL cash). Creating a resilient balance sheet which will utilize cash to execute drilling and workover campaigns while ensuring the debt amortization is met.
• Strategic Shareholder: Upon closing of the Acquisition, Criterium will issue US$1 million common shares of the Company ("Common Shares") to Tourmalet Holdings Ltd. ("Tourmalet"), a company owned by the founding partners of Provident Capital Partners, a leading Southeast Asia focused investment firm which has successfully built multiple billion-dollar businesses in Indonesia. Current MOPL shareholders, which includes Tourmalet, will receive contingency payments upon certain price and production thresholds.

Robin Auld, Chief Executive Officer of Criterium Energy, commented:
"Mont D'Or is a foundational acquisition for Criterium and establishes our Company as a reputable operator in Indonesia and Southeast Asia. By acquiring MOPL we integrate a seasoned team which safely operates over 1,000 bbl/d that generates a stable and scalable cash flow base which we intend to grow rapidly. With the recently announced 2042 Tungkal PSC extension, we intend to execute annual drilling programs to fully realize MOPL's potential to deliver long-term sustainable production growth within cashflow.

As we bring the Mont D'Or team into Criterium, this is an energizing period for our expanding team and our shareholders. The financing arrangements we announce today strengthen our balance sheet and provide flexibility to execute our ambitious growth objectives with MOPL and future acquisitions in the region. We have the experienced team to capture these opportunities and deliver significant value for our shareholders.

We are excited to be working with Research Capital, Canaccord, and Stifel to broaden our global shareholder base and to further enhance global exposure and liquidity. To support this expanded shareholder base we may consider a dual-listing on the London Stock Exchange's AIM market, alongside the current listing on the TSXV in Canada."

Gavin Caudle, Founding Partner of Provident Capital Partners, added:
"This transaction is aligned with our core principle of partnering with strong management teams in good businesses. We are confident that the Criterium team will build upon MOPL's strong reputation established from over 15 years of operations to realize significant value creation. We invest for the long term and as a shareholder of Criterium we will support the team and push them to build an industry-leading business to align with the other companies within our portfolio. I look forward to working with the Criterium team to optimize MOPL as they springboard to other accretive transactions."

Overview of the Tungkal PSC

MOPL holds a 100% working interest in the Tungkal PSC which covers an area of 2,285 km2 and contains the Mengoepeh and Pematang Lantih oil fields that collectively produce 1,030 bbl/d and contain 4.6 MMbbl 2P Reserves as of December 31, 20221. MOPL secured an extension to the PSC to August 2042 and the extension is in the form of the Gross Split PSC which has a favourable contractor take and income tax rate of 40% on net profits. Under the new PSC term MOPL has committed to execute firm work commitments over the next 5 years which include G&G studies, seismic acquisition and two exploration wells.

Mengoepeh Field
The Mengoepeh field was discovered in January 1997 and commenced production in 2004 reaching a peak rate of 2,500 bbl/d. In 2022, two infill wells were drilled bringing the total development well count to 40, with 12 wells currently producing 430 bbl/d1 and 4 non-producing natural gas wells. The main reservoir is the Talang Aker Formation and as of December 31, 2022, the Mengoepeh field has produced 4.7 MMbbl, an estimated 6% recovery factor. Criterium recognizes additional potential above 2P estimates which only equate to an 11% ultimate recovery and intends to focus its efforts on workovers of bypassed pay, infill drilling, and secondary recovery techniques. Acting immediately, Criterium intends to drill 3-4 wells in Q4 2023/Q1 2024 and commence an annual drilling program thereafter.

Pematang Lantih Field
The Pematang Lantih field was discovered in 1939 with first production in 2015 and reached its peak rate of 2,000 bbl/d in June 2018. In 2022, two wells were drilled bringing the total development well count to 6 with current production of 600 bbl/d1. As of December 31, 2022 the field had produced 1.8 MMbbl, representing an estimated 10% recovery factor. As with Mengoepeh, Criterium recognizes significant potential above current 2P estimates which result in an additional ultimate recovery of 19%5. Criterium has identified potential upside in converting former producing wells into water injectors to increase ultimate recovery from the relatively simple faulted anticline structure.

Oil produced from the Tungkal PSC is trucked to either the Gemah terminal (95 km away) or the Tempino terminal (120 km). Average operating costs, including transportation, in 2022 were US$25/bbl, a large portion of which are fixed. As production increases unit operating costs are expected to decrease.

Gas Aggregation
The Tungkal PSC contains 20 Bcf of 2C contingent gas resource1 within the Mengoepeh SE and Macan Gedang structures.  Additional prospects are identified on 2D seismic which contain prospective resource (best case) of 34 Bcf1. Criterium intends to conduct technical and commercial feasibility studies to determine the potential for producing gas for internal use and sales to third parties. 

West Salawati PSC
MOPL holds a 100% operated working interest in the West Salawati PSC located onshore Salawati Island covering an area of 970 km² and containing the Balladewa-A ("BLL-A") oil field which currently produces approximately 20 bbl/d1 from one well. The West Salawati PSC is a cost recovery PSC that expires in 2033. MOPL has outstanding work commitments which include two exploration wells to be drilled prior to 2026. Fortunately, the prospectivity within the block is mature and contains the BLL-B, BLL-C, and BLL-F structures which can utilize existing infrastructure from the BLL-A field. In addition, the PSC contains large prospects located in the shallow water portion of the PSC, most notably Prospect-3X.

BLL-A Field
The BLL-A1 well was drilled in 2015 and encountered 67m of net oil pay in the Kais reef. It was brought onto production in 2018 at an initial rate of 350 bbl/d of oil and water cut of 70-80%. The source of water is unknown but may have been caused by a failure of the cement plug. The well currently produces approximately 20 bbl/d1. Criterium is planning a workover in Q4 2023 to add new perforations and limit water production.

Prospect Inventory
West Salawati contains mature prospects in both the onshore and offshore areas of the PSC. The BLL Cluster located onshore has well-pads prepared for drilling and, if successful, production can be handled at the BLL production facility which is located 1 km away and has capacity in excess of 5,000 bfpd. The offshore area of the PSC contains 15 prospects/leads and Criterium intends to conduct a detailed prospect and lead review and ranking in Q4 2023/Q1 2024.

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