Independent exploration and production company focused on the acquisition, development, and marketing of natural gas, Royale Energy, Inc. (OTCMKTS:ROYL), announces merger agreement with Matrix Oil Management.
SAN DIEGO, Nov. 30, 2016 (GLOBE NEWSWIRE) — Royale Energy, Inc. (ROYL) (“Royale” or the “Company”) and privately held Matrix Oil Management Corporation (“Matrix”) jointly announced today that they have entered into a definitive agreement to merge whereby Royale will acquire substantially all of Matrix, and certain Matrix affiliated entities in exchange for 50% of the common stock of the Company, the assumption of Matrix’s senior secured debt in the amount of approximately $12.4 million, and the issuance of approximately $20.1 million of a newly created Series B Convertible Preferred stock to Matrix’s shareholders (the “Transaction”). The Transaction remains subject to the approval of the shareholders of both companies.
This strategic transaction will create a high-growth California-focused operating company with an executive team experienced in raising accretive capital and acquiring, operating and developing successful oil and gas projects. The Sansinena Field in which Matrix acquired a 50% interest in June 2016 in particular provides more than 40 million barrels of oil equivalent (“BOE”) of net 3P reserves, of which more than 12 million BOE (80% oil) of those reserves are in the proved reserve category.
Highlights of Matrix:
$105 million of proved reserves as estimated by Netherland, Sewell & Associates, Inc. effective March 31, 2016
10,036 net acres across 14 fields located primarily in California and West Texas
Approximately 300 BOE per day of net production (90% oil) with an expected 2016 exit rate of 400 BOE per day
More than 80 proved undeveloped drilling locations across California and West Texas
Core management team has more than 195 combined years of technical and operating experience
Upon consummation of the Transaction, Jonathan Gregory will continue to serve as Chief Executive Officer of Royale, while Johnny Jordan, President of Matrix, will serve as President and Chief Operating Officer. Don Hosmer will continue to lead Royale’s Direct Working Interest program, which has successfully raised over $9 million in direct drilling funds during the last 24 months. Royale’s 30-year history of raising outside drilling funds will prove instrumental in funding the development of the combined companies’ substantial undeveloped reserve base.
The board of the combined company will be comprised of four members from the current Royale board and four members to be appointed by Matrix. Two of the Matrix appointees will be Rod Eson and Jonathan Clarkson. Mr. Eson and Mr. Clarkson bring over 40 years each of oil and gas industry expertise to the Royale board. Harry Hosmer will continue to serve as non-executive Chairman until his planned retirement at the next annual shareholder meeting. The reconstituted board will meet all of the independent director requirements of Nasdaq.
“I have known the management teams of both Royale and Matrix for over ten years. This Transaction represents a transformative milestone for both companies,” said Jonathan Gregory, CEO of Royale. “This is our collective first step toward building a quality, growth-focused production company uniquely positioned in California. With Royale’s proven access to accretive capital and Matrix’s high quality inventory of economic drilling locations and technical experience, we are well positioned for profitable growth even in the current commodity price environment. Matrix acquired the Sansinena Field in June 2016. In five months, they have increased oil production by over 70% and reduced field operating costs by 50%.”
“Matrix is excited to join forces with Royale to leverage their public company experience and capital markets relationships with our quality properties and acquisition and operating experience. This Transaction sets the stage for us to continue pursuing accretive acquisitions, while developing our existing properties. As a substantial shareholder of the combined company, I am confident this Transaction will be transformative and enhance shareholder value,” said Johnny Jordan, President of Matrix.
Stephen Hosmer, CFO of Royale commented, “This fundamental transaction dramatically improves our capital structure, allowing us to immediately apply for re-listing with Nasdaq and gives us the capital flexibility we need to execute our current and future acquisition and development plans.”
Material Terms and Conditions
Royale will acquire Matrix, its subsidiaries and certain affiliated entities in exchange for approximately 25.7 million shares of common stock of Royale, in addition to Royale assuming approximately $12.4 million of Matrix’s senior secured debt resulting in approximately 50% of the common stock of the Company being owned by the current shareholders of Matrix. In addition, the Company will issue approximately $20.1 million of a newly created Series B 3.5% Redeemable Convertible Preferred Stock to Matrix’s shareholders.
The Boards of directors of both Royale and Matrix have unanimously approved the agreement and all other related transactions, and believe that the Transaction is in the best interest of both companies’ stockholders. The Transaction remains subject to the approval of the stockholders of both companies as well as other customary approvals. The companies anticipate completing the Transaction in the first quarter of 2017. The Transaction is expected to qualify as a tax-deferred reorganization under Section 351 of the Internal Revenue Code.
Among other conditions to closing, the Transaction is conditioned upon the consent to assumption of the senior secured debt with existing Matrix lenders or the refinancing of such debt on terms and conditions acceptable to both parties. The Agreement contains certain termination rights for both the Company and Matrix, including, among other things, if the Transaction is not consummated on or before March 31, 2017.
After consummation of the Transaction, the Company intends to apply to list its common stock on Nasdaq or another national securities exchange. The Royale common stock was previously listed on Nasdaq from 1994 until it was delisted in January 2016. The Royale common stock currently trades on the OTC QB (Symbol: ROYL). There is no assurance that the intended listing application will be approved by Nasdaq or another national securities exchange.
Northland Capital Markets is acting as exclusive financial advisor to Royale. Legal counsel to Royale in the transaction is Strasburger & Price, LLP, Austin, Texas. Legal counsel to Matrix in the transaction is Porter & Hedges, LLP, Houston, Texas.
About Royale Energy, Inc.
Founded in 1986, Royale Energy, Inc. (ROYL) is an independent exploration and production company focused on the acquisition, development, and marketing of natural gas. Royale Energy has its primary operations in the Sacramento and San Joaquin basins in California.
Royale Energy, Inc. (OTCMKTS:ROYL) shares are trading +9.38% on the news and in the range of $0.66 – 0.93 during the current trading session. When taking a look at which direction the stock might be headed, investors often look to brokerage analysts who cover the stock. Sell-side research firms on Wall Street currently have a consensus one-year price target of $14.91 on the stock. This is according to brokerage analysts polled by Thomson Reuters First Call.
Are Shares of Royale Energy, Inc. (OTCMKTS:ROYL) Ready to Explode? Sign up to our Newsletter to be the First to Know
Sign up to get our Free Penny Stock Picks Before the Street!
In looking at where the stock is trading on a technical level, the stock is trading +8.84% away from its 50-day moving average of $0.64. Based on the most recent available data, the equity is -24.73% off of its 52-week high of $0.93 and +1066.67% away from its 52-week low which is $0.06.
Today, the stock opened at $0.66 and the last bid at the time of writing stood at $0.70. During the session thus far, the equity dipped down to $0.66 and touched $0.93 as the high point. Royale Energy, Inc. (OTCMKTS:ROYL) has a market cap of $15.21M and has seen an average daily volume of 20,055 over the past three months.
Sign Up to Receive Breaking Alerts on Stocks That Are Primed to Make a Run in the Bar Below.
Sign up to get our Free Penny Stock Picks Before the Street!
Disclaimer: Nothing contained in this publication is intended to constitute legal, tax, securities, or investment advice, nor an opinion regarding the appropriateness of any investment, nor a solicitation of any type. The general information contained in this publication should not be acted upon without obtaining specific legal, tax, and investment advice from a licensed professional.