Oando Energy Resources Enters Into New Facility Agreement With Oando Plc

CALGARY, Alberta, February 10, 2014 /PRNewswire/ --

Oando Energy Resources Inc. ("Oando Energy Resources" or the "Company") (TSX: OER), a company focused on oil and gas exploration and production in Nigeria, today announced that it has entered into a new facility agreement and received a signed repayment deed (together, the "Loan Documentation") from Oando Plc, the holder of 94.6% of the common shares of the Company, and a non-arm's length party to the Company ("Oando"). The Company intends to execute the repayment deed upon the expiry of the Notice Period (as defined below).

The Loan Documentation, once effective, replaces the terms of previous loan arrangements between the Company and Oando. Pursuant to the Loan Documentation, Oando has agreed to loan up to US$1.2 billion to the Company (the "Facility"), including amounts previously advanced of US$401 million, at an annual interest rate of 4% from the effective date of the Loan Documentation. OER has agreed to pay Oando a Facility fee of 4% of the amount available for drawdown under the Facility Agreement, which fee is equal to US$48 million.

Pursuant to the Loan Documentation, each of Oando and the Company will be permitted to elect to convert outstanding principal under the facility agreement and interest accrued to date into securities of the Company, based on:

        the terms provided in a final prospectus of the Company, in which case
        the price for conversion and nature of securities to be received shall
    (a) be as set out under the offering;
        where no final prospectus has been filed, the terms provided in an
        arm's length private placement, in which case the price for conversion
        and nature of securities to be received shall be as set out under the
    (b) private placement agreement;
        where there has been no prospectus or private placement offering,
        common shares of the Company ("Shares") based on the 5-day volume
        weighted average price of the Shares as at the time of the completion
        or termination of the proposed acquisition of the Nigerian upstream
        oil and gas business of ConocoPhillips Company (as previously
        announced in December 2012 and as most recently updated on January 31,
    (c) 2014); and
        notwithstanding the foregoing, such terms as may be agreed by the
    (d) Company and Oando.

In addition, Oando has the sole right to also convert interest accruing under the Facility after the execution date of the repayment deed, on the terms and conditions set out therein. The price for conversion is subject to compliance with applicable rules of the Toronto Stock Exchange ("TSX") and prior approval by the TSX.

Assuming that the Company draws down the entire principal amount on February 20, 2014 and repays it on December 31, 2015, the total consideration payable by the Company to Oando will be approximately US$153.1 million, representing approximately 98.4% of the Company's market capitalization (based on the closing price of the Shares on February 4, 2014), which exceeds 10% of the Company's market capitalization, and, pursuant to Section 501(c) of the TSX Company Manual, prima facie requires shareholder approval. If the Company draws down the entire principal amount on February 20, 2014, repays C$1.06 billion by the issuance of Units (as discussed in more detail below under "Intention to Convert Oando Debt to Equity") on February 28, 2014 and repays the remaining amount of principal of approximately C$259.6 million on December 31, 2015, the total consideration payable by the Company to Oando will be approximately C$67.9 million representing approximately 43.2% of the Company's market capitalization (based on the closing price of the Company's Shares on February 4, 2014). This consideration exceeds 10% of the Company's market capitalization and, pursuant to Section 501(c) of the TSX Company Manual, prima facie requires shareholder approval.

Intention to Convert Oando Debt to Equity

The Company intends to exercise its right to repay outstanding principal and interest accrued to date under the Facility through the issuance of securities ("Securities Repayment"), in reliance upon its rights under the repayment deed and on the basis of the terms provided in the Private Placement (as defined below). More particularly, the Company intends to repay all amounts outstanding under the Facility (up to the Maximum Amount (as defined below)) on the basis of a credit of C$1.57 for each Unit issued to Oando, where a Unit consists of one Share and one half-warrant (on the terms outlined below). The Unit price of C$1.57 represents a premium of approximately 3.3% to the market price (as defined in the TSX Company Manual) of the Shares as of January 28, 2014, the date on which the Company applied to the TSX for approval for the Securities Repayment ("Approval Request").

Each whole warrant (a "Warrant") will entitle Oando to acquire one Share at an exercise price of C$2.00 for a period of 24 months from the date of the completion of the proposed acquisition by the Company from ConocoPhillips of its Nigerian upstream oil and gas business (the "COP Acquisition"). The exercise price of the Warrants represents a premium of approximately 31.6% to the market price (as defined in the TSX Company Manual) of the Shares on the TSX as of the date of the Approval Request. If, after a period of six months from the closing of the COP Acquisition, the Shares trade on the TSX at a price greater than C$3.50 for a period of at least 10 consecutive trading days, the Warrants will expire on the date which is 30 days following the last day of such 10 consecutive trading days. The Warrants will contain standard anti-dilution provisions providing for adjustments in the event of any reorganization of the authorized capital of the Company by way of consolidated, merger, sub-division, amalgamation or otherwise, or the payment of any stock dividends.

The Company will be restricted from repaying principal and interest accrued to the date of repayment of the Facility to the extent that it would cause Oando's interest in the Company to be increased beyond its existing ownership of 100,339,052 Shares, representing approximately 94.6% (on a non-diluted basis) of the total outstanding number of Shares (the "Ownership Restriction"). In this regard and assuming the prior or concurrent closing of the Private Placement, the Company expects to be able to repay an aggregate amount of approximately C$1.06 billion (the "Maximum Amount") under the Facility, assuming such amount has been drawn down and is outstanding at the relevant time, without exceeding the Ownership Restriction. The repayment by the Company of the Maximum Amount (assuming it has been drawn down) by the issuance of Units will result in the ownership by Oando of 777,413,660 Units (comprising 777,413,660 Shares and 338,537,304 Warrants), with the exercise of such Warrants also being subject to the Ownership Restriction.

The Company may, as needed, draw down the Maximum Amount in one or more tranches prior to the closing of the COP Acquisition and intends, at the closing of the Private Placement, to convert as much of the amount then outstanding under the Facility, subject to the Ownership Restriction ("First Tranche Conversion"). On the basis that (i) the Company converts up to US$600 million under the Facility (assuming such amount has been drawn down by the date of closing of the Private Placement), and (ii) an aggregate of 38,561,145 Units (of which 35,070,063 Units are to be issued for cash consideration of US$50 million and 3,491,082 Units are to be issued as consideration for the acquisition by the Company of the entire issued share capital of Medal Oil Company Limited) are issued pursuant to the Private Placement ("Private Placement Units") prior to or concurrently with the First Tranche Conversion, Oando will own 520,721,217 Shares and 210,191,082 Warrants. As a result, Oando, the arm's length subscribers pursuant to the Private Placement ("Private Placees") and parties other than Oando and the Private Placees ("Other Shareholders") will have the following ownership interests (on a non-diluted basis) in the Company: approximately 92.16% (520,721,217 Shares), 6.83% (38,561,145 Shares) and 1.01% (5,714,568 Shares), respectively. The TSX has given conditional approval to permit such conversion in stages, where amounts are drawn down in tranches.

On the basis that (i) the Company converts the Maximum Amount, and (ii) an aggregate of 38,561,145 Private Placement Units have been issued prior to or concurrent with the conversion of the Maximum Amount, Oando, the Private Placees and the Other Shareholders will have the following ownership interests (on a non-diluted basis): approximately 94.61% (777,413,660 Shares), 4.69% (38,561,145 Shares) and 0.70% (5,714,568 Shares), respectively. If the Private Placees exercise all of their Warrants, they will own, in aggregate, 57,841,717 Shares, and the aggregate ownership interests of Oando, the Private Placees and the Other Shareholders will be approximately 92.44%, 6.88% and 0.68%, respectively (assuming none of the Company's currently outstanding warrants or options are exercised). As the Company intends to repay as much of the Facility as is outstanding (up to the Maximum Amount) concurrently with the closing of the Private Placement, neither the issuance of the Units to Oando, nor the Private Placees, is expected to affect control of the Company.

On the basis of conversion by the Company of the Maximum Amount, such conversion could (i) provide consideration to an insider in excess of 10% of the Company's market capitalization; and/or (ii) constitute a private placement for an aggregate number of Shares greater than 25% of the number of Oando Energy Resources' current outstanding Shares, on a non-diluted basis, at a price per Share less than the market price (as defined in the TSX Company Manual) on the date hereof (see below regarding the market price of issuances of securities involving whole or partial warrants); and/or (iii) constitute a private placement to insiders for greater than 10% of the number of Oando Energy Resources' current outstanding Shares, on a non-diluted basis, each of which prima facie requires shareholder approval under Sections 501(c), 607(g)(i) and 607(g)(ii), respectively, of the TSX Company Manual.

Notwithstanding the foregoing requirements for shareholder approval, Section 604(f) of the TSX Company Manual provides an exemption from the shareholder approval requirement set out in Sections 501(c), 607(g)(i) and 607(g)(ii) where there is a holder of at least 90% of a listed issuer's shares and the listed issuer publishes a press release at least 10 business days in advance of the closing of the applicable transaction ("Notice Period") disclosing the material terms of the transaction and that the issuer has relied upon this exemption. As Oando owns 94.6% of the Company's Shares, the Company intends to rely on this exemption. The effective date of the Loan Documentation will not occur until the expiry of the Notice Period and following approval by the independent directors of Oando Energy Resources unrelated to Oando, which approval has been given.

Private Placement Update

Further to the Company's press release dated January 28, 2014 in respect of a proposed private placement (the "Private Placement"), shareholder approval for the Private Placement is prima facie required pursuant to Section 607(g)(i) of the TSX Company Manual insofar as the aggregate number of listed securities issuable to the subscribers is greater than 25% of the number of outstanding securities of the Company that are outstanding, on a non-diluted basis, prior to the date of closing of the Private Placement. As well, the price per security is deemed to be less than the market price (as defined in the TSX Company Manual) as a result of the issuance of warrants pursuant to the Private Placement.

Notwithstanding the foregoing, Section 604(f) of the TSX Company Manual provides an exemption from such shareholder approval requirements where there is a holder of at least 90% of a listed issuer's shares and the listed issuer issues a press release at least 10 business days in advance of the closing of the transaction disclosing the material terms of the transaction and that the issuer has relied upon this exemption. As Oando owns 94.6% of the Company's Shares, the Company intends to rely on this exemption. The completion of the Private Placement will not occur until the expiry of the Notice Period. The Private Placement is subject to TSX approval.

Forward Looking Statements:

This news release contains forward-looking statements and forward-looking information within the meaning of applicable securities laws. The use of any of the words "expect", "anticipate", "continue", "estimate", "objective", "ongoing", "may", "will", "project", "should", "believe", "plans", "intends" and similar expressions are intended to identify forward-looking information or statements. In particular, this news release contains forward-looking statements relating to intended acquisitions.

Although the Company believes that the expectations and assumptions on which such forward-looking statements and information are reasonable, undue reliance should not be placed on the forward-looking statements and information because the Company can give no assurance that such statements and information will prove to be correct. Since forward-looking statements and information address future events and conditions, by their very nature they involve inherent risks and uncertainties.

Actual results could differ materially from those currently anticipated due to a number of factors and risks. These include, but are not limited to: risks related to international operations, the actual results of current exploration and drilling activities, changes in project parameters as plans continue to be refined and the future price of crude oil. Accordingly, readers should not place undue reliance on the forward-looking statements. Readers are cautioned that the foregoing list of factors is not exhaustive.

Additional information on these and other factors that could affect the Company's financial results are included in reports on file with applicable securities regulatory authorities and may be accessed through the SEDAR website (http://www.sedar.com) for the Company. The forward-looking statements and information contained in this news release are made as of the date hereof and the Company undertakes no obligation to update publicly or revise any forward-looking statements or information, whether as a result of new information, future events or otherwise, unless so required by applicable securities laws.

For further information:
Pade Durotoye, CEO
Oando Energy Resources Inc.
pdurotoye@oandoenergyresources.com
+1 403-561-1713

Tokunboh Akindele
Head Investor Relations
Oando Energy Resources Inc.
takindele@oandoenergyresources.com
+1 403-560-7450

Jeremy Dietz/David Feick
Investor Relations
+1 403-218-2833
jdietz@tmxequicom.com
dfeick@tmxequicom.com