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EW.V - East West Petroleum Corp (Due Diligence Report) Symbol: EW.V (Canada) & EWPMF(USA) Current Price: $0.055CAD & $0.04USD Shares Outstanding: 89,585,665 Most Recent Financials (Ending September 30th, 2019) In CAD ASSETS Cash: $3,719,020 GST Receivable: $7,923 Amounts Receivable: $223,772 Prepaid Expenses: $22,654 Investments: $554,709 Assets Held For Sale: $2,067,867 Total Assets: $6,595,945 LIABILITIES Accounts Payable: $206,404 Decommissioning Liability: $309,904 Liabilities On Asset Held For Sale: $943,472 Deposit: $65,505 Total Liabilities: $1,525,285 NAV $6,595,945 - $1,525,285 = $5,070,660 Management Discussion Highlights Company Overview The Company is a reporting issuer in British Columbia and Alberta and trades on the TSX Venture Exchange (“TSXV”) under the symbol “EW” as a Tier 1 issuer. The Company currently carries on business in one operating segment, being the acquisition of, exploration for and production from petroleum and natural gas properties. The Company’s current portfolio consists of interests in exploration concessions in New Zealand and Romania and producing properties in the Taranaki Basin, New Zealand. The Company has agreed to sell its interest in PEP 54877 and PMP 60291 which comprise the majority of its New Zealand assets. See “Proposed Disposition of New Zealand Oil & Gas Assets”. The Company also holds investments in common shares of Advantage Lithium Corp. (“Advantage Lithium”) and Seaway Energy Services Inc. (Seaway”), public companies whose common shares trade on the TSXV. The Company’s principal office is located at #1305 - 1090 West Georgia Street, Vancouver, BC, V6E 3V7. Proposed Disposition of New Zealand Oil & Gas Assets On June 24, 2019 the Company signed a heads of agreement (the “HOA”) with a private arm’s length New Zealand company (the “Buyer”) pursuant to which the Company has agreed to sell its interest in PEP 54877 and PMP 60291 (collectively, the “Permits”) which comprise the entirety of the Company’s assets in New Zealand (the “Transaction”). On October 5, 2019 the Company and the Buyer signed the definitive agreement ( the “Definitive Agreement”) for the sale and purchase of the Permits under the Transaction. The Permits are the subject of a joint operating agreement (the “JOA”) between EWNZ, a wholly-owned subsidiary of the Company, and Cheal Petroleum Limited (“CPL”). The disposition of the Company’s interest in the Permits will be conditional upon the waiver of CPL of its rights under the JOA to acquire the Company’s interest in the Permits, and the waiver or satisfaction of any other obligations as may exist to CPL. Pursuant to the terms of the Definitive Agreement, and in consideration of the Transaction, the Buyer will pay the Company US $1,900,000 in cash. The effective date for the sale is April 1, 2019 and payments are staged over 16 months of closing with initial payment of US $1,000,000 with normal closing adjustments, due on closing. On August 7, 2019 the Company received Company shareholder approval. Completion of the Transaction is subject to approvals to the transfer from New Zealand’s Overseas Investment Act 2005 and New Zealand Petroleum and Minerals (“NZP&M”) and final TSXV approval. Romania During fiscal 2010 the Company was informed by the government of Romania that it had been awarded four exploration blocks located in the Pannonian Basin, in western Romania. In May 2011 the Company signed petroleum concession agreements with the National Agency for Minerals and Hydrocarbons (“NAMR”) the government agency in Romania which regulates the oil and gas industry. The four concessions have specific mandatory work programs (the “Romania Work Programs”), which were estimated at US $62,741,000 for all four programs. Production from the concessions is also subject to royalties of between 3.5% to 13.5% based on quarterly gross production payable to the government. On May 20, 2011 the Company and Naftna Industrija Srbije j.s.c. Novi Sad (“NIS”), an arm’s length corporation, signed a memorandum of understanding to jointly explore the four exploration blocks in Romania. On October 27, 2011 the Company and NIS signed a farm-out agreement (the “Farm-out”). Under the terms of the Farm-out, NIS has paid the Company a total of $525,000 for the assignment of an 85% participation interest and operatorship of the Romania Work Programs to NIS. NIS is the operator of the four concessions and has the obligation to fund the Romania Work Programs, including environmental work, 2D and 3D seismic acquisition and processing, and the drilling of 12 wells. The Company retains a 15% carried interest in each block through the obligatory Phase I work program and an optional one year Phase II work program which carries additional commitments. The current expiries of the Phase I terms are as follows: Block EX-2 December 12, 2021, Block EX-3 December 14, 2021 and November 22, 2020 for Blocks EX-7 and EX-8. If a commercial discovery is made, the Company is responsible for its 15% interest in development of the commercial discovery. As operator, NIS has proposed and is actively progressing comprehensive exploration programs in the EX-2, EX-3, EX-7 and EX-8 exploration blocks in Romania. It should be noted that all activities are dependent on securing the necessary government and local approvals. On Block Ex-2, acquisition program of 3D seismic in the amount of 170 Km2 was completed in Q3/2019 (calendar) and processing of the data is underway. On Block EX-3, processing of the data acquired last year on 223 km2 3D seismic program has been finished. Interpretation of the data is ongoing and results are expected by the end of December 2019. On Block EX-7, an exploration well, Bvs-1000, was drilled in 1Q/2019 (calendar) to a total depth of 3,800 meters and encountered several potential hydrocarbon bearing zones as identified on logs. Testing is now expected to commence in 1Q/2020(calendar). A deviated appraisal well on the Teremia North discovery, Ter-1001, was drilled in 1Q/2019 (calendar) and encountered several potential hydrocarbon-bearing zones. A long-term test was conducted from April to July 2019 which established a stabilized oil flow rate of approximately 150 bopd. Extended well testing is ongoing. On Block EX-8, a second deviated appraisal well on the Teremia North field, Ter-1002, was spudded in September 2019 and has been drilled to a measured depth of more than 2,600 metres. Extended testing is planned. An exploration well, Pes-1000 was drilled and completed in 3Q/2019 (calendar) to a total depth of around 2,500 metres. Several potential hydrocarbon bearing zones were encountered and testing is planned to commence before the end of December 2019. NIS will be funding 100% of the costs and fully carrying the Company through the commitment work programs in each of the blocks in return for earning an 85% interest in each licence. Investments As at September 30, 2019 the Company held 1,719,000 common shares of Advantage Lithium and 512,400 common shares of Seaway. The September 30, 2019 fair value of these investments was $554,709. Certain current and former directors and officers of the Company are also current and former directors and /or officers of Advantage Lithium and Seaway. Outstanding Share Data The Company’s authorized share capital is unlimited common shares with no par value. As at November 27, 2019 there were 89,585,665 outstanding common shares and 3,415,000 share options outstanding with exercise prices ranging from $0.09 to $0.135 per share. | ||||||||||||||
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