SOUTH AFRICA: Crown Energy Retains Block 2B After Madagscar, Iraq Assets Sale

Crown Energy has entered into an agreement dated 20 October 2021 under which the
purchaser has the right to acquire (or pre-empt any sale of) Crown’s up-stream oil and
gas assets (except for operations in South Africa, where the Company has an existing
partnership agreement).

Under the terms of the Agreement, the purchaser under the Agreement the Buyer has the right to acquire (and/or is granted rights applicable in the event of Crown Energy’s disposal) of the Company’s up-stream oil and gas assets, including all associated claims and excluding licensed operations in relation to Block 2B in South Africa where the company has 10% working interest. Any such acquisition will be effected through the acquisition of the entire issued share capital of the relevant subsidiary entities.

Crown Energy has thus sold its 100% owned Manja block 3108 (onshore exploration licence on the western side of Madagascar) and an onshore exploration and production license over an area of 24,000 square kilometres located in northern Iraq south-west of Kurdistan.

The Manja block covers an area of 7,180 square kilometres and has several structures were identified and the largest is in the north-western part of the licence area. This structure may contain up to 1,250 million barrels of oil, and it is situated at a depth of 3,500 metres. Gas was found in the southern part of the licence area back in the 1950’s. In recent years, major gas finds have been found in an adjoining licence area to the south.

Exploration Block 2B in South Africa is located offshore on the Atlantic coast just  south of the border with Namibia. A small oil discovery was previously made in the exploration area. As a result, the next step in this licence  will be to drill an appraisal well to ascertain the size, extent, and production volumes, and thus establish that this is a commercially strong oil project.

The total consideration amounts to US$450 million before deduction of transaction
costs. Under the terms of the Agreement the Buyer will pay to the Company within 5
Business Days an initial consideration of US$75 million, which has been paid by way of
non-refundable advance payment for the acquisition and/or the grant of rights in respect
of the relevant oil & gas assets.

In addition to the Initial Consideration, the Buyer is obliged to pay an additional US$8
million to the Company on each 6 month anniversary of signing the Agreement with a
final payment of US$33 million on the 5 year anniversary, up to an aggregate of US$105
million (the Additional Consideration). The Additional Consideration is also paid by way
of non-refundable advance payment.

Following the acquisition of the initial subsidiary entity, the Buyer shall also pay up to
US$270 million in earn-out consideration during the earn out period in case certain
milestones are achieved.

Any acquisition of a subsidiary entity will be subject to regulatory approval and
customary closing conditions. It is expected that completion of the first acquisition
contemplated shall occur prior to 20 October 2026.

Pierre-Emmanuel Weil, Chairman of the Board, commented: “We are very proud today.
This transaction shows Crown Energy’s ability to create significant value from its assets
and to create a bright future”.