Lycos Energy has entered into a definitive agreement today to acquire Durham Creek Exploration Ltd. ("DCEL"), a privately-held, arm's length, heavy oil producer, by way of a plan of arrangement for total consideration, prior to adjustments, of $22.5 million, consisting of $12.5 million in cash and 2.8 million common shares of Lycos at a deemed price of $3.55 per Lycos Share.

The Acquisition will be funded through a $25 million bought deal equity financing. 

Acquisition Highlights

• 35,382 net acres (55.93 net sections) of land suitable for multi-lateral development proximally located to the Company's recent acquisition of Wyatt Resources
• With DCEL and the recently announced Wyatt acquisition, Lycos has increased its corporate land holdings by 31% to 147,956 net acres.
• The Company has identified over 70 net Mannville heavy oil multi-lateral drilling locations on DCEL lands dramatically increasing the current development portfolio to 210 locations 
• Increases Tier 1 Mannville inventory (Rex, Waseca, GP and Cummings) by 77% to 55 total net locations. Tier 1 locations have an expected payout period of less than 6 months and an NPV-10% of $5.5 million(1).
• Increases Tier 2 Mannville inventory (Rex, Waseca, GP and Cummings) by 49% to 140.6 total net locations. Tier 2 locations have an expected payout period of under 12 months and an NPV-10% of $3.4 million(1).

(1) Payout and NPV-10% assumptions are based on pricing assumptions of; US$75/bbl WTI; (US$15) WCS differential; and $0.741 CAD/USD, operating expenses of $15.48/boe, royalty rate of 11.4% and capital expenditures of $1.6 million.

• Acquired production is expected to average ~180 boe/d (99% crude oil) at close from a multi-lateral well drilled at Lindbergh 
• DCEL's first well targeting the Waseca formation achieved an IP30 of 183 boe/d.
• The initial drilling results from this well support the Company's expectation that it will be able to deploys its’ multi-lateral/fishbone drilling technique to further develop the acquired lands.
• Acquired land base to be developed using Lycos' fishbone well designs
• Lycos has achieved an IP30 of 235 boe/d and an IP26 of 355 boe/d on its most recent two Swimming Rex wells using a half fishbone design and a substantially redesigned drilling fluid system.
• The Company believes this approach materially enhances deliverability and will be used to develop the DCEL's inventory.

Summary of the Acquisition

Lycos Energy will acquire DCEL for total consideration, prior to adjustments, of $22.5 million, consisting of $12.5 million in cash and 2.8 million Lycos Shares at a deemed price of $3.55 per Lycos Share.

Concurrent with the execution of the Acquisition Agreement, shareholders of DCEL representing approximately 83% of the outstanding common shares of DCEL executed written resolutions irrevocably approving the Acquisition. The Acquisition Agreement provides for, among other things, a non-solicitation covenant on the part of DCEL. 

The Acquisition is expected to close on or before October 16, 2023, subject to the completion of the Offering and certain customary conditions and approvals, including the approval of the Court of King's Bench of Alberta and the TSX Venture Exchange (the "TSXV").

All of the Lycos Shares issued to the insiders of DCEL, representing approximately 81% of the outstanding shares of DCEL, will be subject hold periods and released as to one third on each of the dates that is three, six and nine months following the closing of the Acquisition.

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