REG - Cloudbreak Discovery - Agreement with Iron Forge Holdings (III)

Cloudbreak DiscoveryAnnouncement

16/08/2022 07:00

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RNS Number : 0900W  Cloudbreak Discovery PLC  16 August 2022

16 August 2022

 

Cloudbreak Discovery Plc

("Cloudbreak" or the "Company")

 

Cloudbreak Provides Acquisition and Development Capital Via Debenture,
convertible into a 6% Overriding Royalty Interest

 

Cloudbreak Discovery PLC (LSE: CDL), a leading natural resources project
generator with a focus on commodities required for the energy transition, is
pleased to announce that it has entered into an agreement with Iron Forge
Holdings (III) Ltd. ("IF3") whereby Cloudbreak will provide IF3 with USD $1.5
million in development capital for the Butte Strawn Energy Project ("Butte
Strawn" or the "Project") located in Irion County, Texas. The capital is being
deployed as a convertible debenture which, at Cloudbreak's discretion, can be
converted into a six per cent Overriding Royalty Interest ("ORI") on the
Project in addition to other considerations.

 

IF3 has defined a detailed program consisting of workovers of existing wells,
new drilling and enhanced oil recovery techniques to rapidly grow both oil and
natural gas production on the Project. IF3 is well financed and planning to
grow through the drill program as well as through acquisition of additional
brownfield energy projects that have potential to provide near-term returns
through similar production growth programs.

 

Key Terms of the Transaction

·    Cloudbreak will provide IF3 with a USD $1.5 million debenture on a
two-year term and in two tranches

o  USD $500,000 on signing

o  USD $1 million within 90 days of signing

·    The debenture is convertible into a six per cent ORI on the Project
at Cloudbreak's discretion, in addition to other considerations

·    IF3 will pay 12.5 per cent per annum interest to Cloudbreak,
calculated and paid quarterly in cash or shares in IF3 at the discretion of
Cloudbreak on the USD $1.5 million debenture

·    IF3 will grant Cloudbreak;

o  6,000,000 Warrants with a CAD $0.35 strike price and a three-year term
from financial close. The Warrants are subject to an acceleration clause;

o  First position lien on the Project;

o  An area of interest providing Cloudbreak with a six per cent ORI on any
project acquired within a two-mile radius of the Butte Strawn lease boundary;
and

o  An area of influence giving Cloudbreak the right of first refusal to
finance additional acquisitions within five miles of the Project boundary and
apply its existing six per cent ORI to that project in addition to terms
settled on as part of an acquisition.

·    IF3 will endeavor to enter into a definitive agreement related to a
public transaction by 30 September 2022, with completion by 31 January 2023

 

 

The Company has access to the resources to meet the obligations of this
agreement.

 

Kyler Hardy, President and CEO of Cloudbreak, commented, "This second royalty
acquisition in Texas further demonstrates the opportunity in the pipeline of
royalties that we have built and are now executing on. We are successfully
deploying our project generator methodology from the mineral and metals sector
into the energy sector and growing cashflow through equity and royalty
payments. Cloudbreak has chosen to focus on brownfield energy projects that
can be acquired at favourable valuations and have the potential for rapid
returns. Firstly, through workovers and recompletions followed by new drilling
locations.

 

"A key component of Cloudbreak's energy royalty strategy is identifying
operators and management teams with track records of delivering tangible and
measurable results. This provides us with confidence in their ability to
execute on the agreed plan around projects that we participate in though a
royalty structure. We are excited to be working with the team at IF3 and look
forward to additional regional acquisitions.

 

"Through this and similar transactions in the future, we see an opportunity to
create significant shareholder value by growing Cloudbreak's cash-flow though
structured deals and portfolio royalty acquisitions in the natural resources
sector."

 

About the Butte Strawn Energy Project

 

The Butte Strawn Field is an 897.2 acre field held by production located on
the Eastern Flank of the Permian Basin. The primary producing formation is the
Strawn Reef with an average depth of 7,500 feet. Iron Forge Holdings (III)
Ltd. has a 100 per cent working interest and a 60 per cent net revenue
interest. Projected production is 560 barrels of oil per day from seven wells
from proven recoverable reserves. All in operating cost per barrel is
projected at $10.19, including production taxes, acquisition and drilling
cost. The field has proven recoverable reserves of 1,134,000 barrels* with a
PV10 value of USD$40.5 million. Reserve Commodity Price is constant at $85 per
barrel. In addition, the Probable behind pipe reserves from the Wolfcamp Lime,
Canyon A & B sands and the Strawn Sandstone are 1,080,000 barrels.
(*Yeager, R. 1997 Reserves and Performance Engineering Study S&T/Atikinson
Leasehold Buttes (Strawn) Field Irion County, Texas).

 

This announcement contains inside information for the purposes of Article 7 of
the Market Abuse Regulation (EU) 596/2014 as it forms part of UK domestic law
by virtue of the European Union (Withdrawal) Act 2018 ("MAR"), and is
disclosed in accordance with the Company's obligations under Article 17 of
MAR.

 

Qualified Person

Mr. Rory Kutluoglu P. Geo., Chief Operation Officer of the Company, is the
Qualified Person ("QP") under NI 43-101 for the technical information in this
news release, has verified the data disclosed and approves the technical
contents contained in this news release.

 

-ENDS-

 

For additional information please contact:

 

 Cloudbreak Discovery PLC                                    Tel: +1 604 428 9480

                                                             Kyler Hardy, CEO                khardy@cloudbreakdiscovery.com (mailto:khardy@cloudbreakdiscovery.com)

 Novum Securities                                            Tel: +44 7399 9400

 (Financial Adviser)
                                                             David Coffman / Lucy Bowden

 Shard Capital Partners                                      Tel: +44 207 186 9900

 (Broker)

                                                             Damon Heath / Isabella Pierre

 BlytheRay                                                   Tel: +44 207 138 3204           Cloudbreak@blytheray.com (mailto:Cloudbreak@blytheray.com)

 (Financial PR/IR-London)
                                                             Tim Blythe

                                                             Megan Ray

 Stellium Services                                           Tel: +44(0)207 129 1205         Cloudbreak@StelliumServices.com (mailto:Cloudbreak@StelliumServices.com)

 (Investor Relations)
 www.StelliumServices.com (http://www.StelliumServices.com)  Andrew Wilson
                                                             Claire Bowden

 

 

About Cloudbreak Discovery PLC

Cloudbreak Discovery PLC, is a leading natural resource project generator,
working across a wide array of mineral assets that are being developed and
managed by an experienced team with a proven track record. Value accretion
within the projects being developed by Cloudbreak's generative model enables a
multi-asset approach to investing and exploration. Diversification within the
mining sector and amongst resource classes is key to withstanding the cycles
of natural resource investing.

 

About Iron Forge Holdings (III) Ltd.

Iron Forge Holdings (III) Ltd. is a private Canadian energy company focused on
the acquisition, development and production of a portfolio of oil and gas
assets, located onshore, USA.  Iron Forge has built a team of seasoned
hydrocarbon professionals with more than 100 years of combined experience in
acquiring and producing from capped and exploration stage assets, primarily
across prolific production basins in Texas.

 

 

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