BRISBANE - Strata-X Energy Limited (ASX: SXA, TSXV: SXE) ('Strata-X') and Real Energy Corporation Limited (ASX: RLE) ('Real Energy') with on shore domestic gas appraisal and development in Queensland and Botswana, are pleased to announce that the Companies have entered into an arm's length binding Scheme Implementation Agreement dated July 15, 2020 ('SIA') to pursue a nil premium merger whereby Real Energy shareholders will receive one (1) new Strata-X share for three (3) Real Energy shares that they own.
The combination of Strata-X and Real Energy will be renamed Pure Energy Corporation Limited ('Pure Energy') and represents a compelling opportunity to create a material gas business from the significant 100% owned gas resources contained within projects located in the Surat and Cooper Basins in Queensland and the Republic of Botswana.
Pure Energy's gas projects offer significant Company Growth Potential (Post-Merger)
Pure Energy's Project Venus is located within the Walloon CSG fairway and immediately adjacent to gas pipeline infrastructure in the Surat Basin.(1)
In addition, the merged entity's 100% owned broader asset portfolio in Australia and the Republic of Botswana presents further upside potential. Pure Energy will have a total 11.8 TCF(1,2,3) of Prospective Gas Resources with 770 BCF of 3C(2) and 353 BCF of 2C(2,3) Contingent Gas Resources. Stated Prospective Resource figures are from a Report dated 10 December 2019 by Timothy Hower, Senior Advisor at MHA Petroleum Consultants for Project Venus along with Prospective and Contingent Resources for the Serowe CSG Project by the same author in a report dated 10 May 2019 and for the Windorah Gas Project in a report dated 5 June 2015 from Paul Szatkowski, Senior VP of DeGolyer and MacNaughton.
ASX disclosure note - 5.28.2 - Prospective Resources - The estimated quantities of petroleum that may potentially be recovered by the application of a future development project(s) relate to undiscovered accumulations. These estimates have both an associated risk of discovery and a risk of development. Further exploration appraisal and evaluation is required to determine the existence of a significant quantity of potentially moveable hydrocarbons.
Pure Energy's gas projects have several common attributes
Wells are drilled that prove the gas resources are present including third party certifications.
The primary technical risk is finding completion methods to prove commercial gas flows.
Over the next 12 months, Pure Energy plans to use innovative well completion and non-frack reservoir enhancement methods with the goal to prove commercial gas flows.
Proving commercial gas flows is the precursor to predictable reserves increases and the potential for substantial company growth.
All three gas projects have ready gas markets.
The merger of Strata-X Energy and Real Energy into Pure Energy has the goal to create the next ASX energy growth stock. With the significant resources in the three gas projects and finding the keys to unlock those resources, this goal is achievable.
Pure Energy targets lower emissions and joining the Hydrogen Economy
Pure Energy's vision is to lower emissions initially through substitution of methane for coal and diesel. Pure Energy is also investigating the feasibility of building a methane to hydrogen plant in Gladstone. Looking ahead, one of Pure Energy's goals is converting methane to hydrogen and value add graphite products using a hybrid methane pyrolysis method.
Merger to reduce administration costs and combine technical and management expertise
The removal of duplicate administrative functions and listing costs delivers significant cost savings to the merged entity. Scott Brown, Real Energy's current Managing Director is the nominated Managing Director for Pure Energy. Strata-X Energy's current Executive Chairman, Ron Prefontaine, a 41-year veteran and one of the pioneers of CSG in Australia, is the nominated Chairman of Pure Energy.
About the same time, Ausindustry had rejected Real Energy's $13 million R&D claim (of which it had already been paid $7 million) which negatively impacted their share price.
Mr. Ron Prefontaine, as part of Strata-X's due diligence of Real Energy, reviewed the methods and results of Real Energy's experimentation and trials to prove commercial gas flow rates. Following his review, he offered the following comments based on his many decades of industry experience: ' I believe that while Real's systematic approach to proving commercial gas flow rates discounted some methods, on the whole, Real was on the right track. In my view, there are current and emerging hybrid reservoir enhancement methods that need to be tested in order to establish that improvements and potentially sustained commercial gas flow rates are possible.'
Mr. Prefontaine also reviewed Real's AusIndustry R&D submissions and the assessor's report. Mr. Prefontaine noted that 'there are compelling grounds to challenge the assessor's findings, leaving open the possibility that they could be reversed on appeal to an arbitrator.' He stated that 'while it is impossible to predict the final outcome of arbitration, I believe that a significant portion of Real's R&D claim could ultimately be upheld as constituting valid R&D within the meaning of the Federal tax legislation. Should such an outcome be obtained, Real's R&D claim could prove to be an asset. That being said, the simpler and more prudent approach, and the one adopted by Strata-X, was to assign a zero value to the R&D cost claim.'
Scott Brown, Managing Director of Real Energy said: 'This is a compelling combination taking the best elements of both companies and having a strong portfolio of Projects with positions in both the Surat Basin and Cooper Basin, and having a significant project in Botswana together with the potential to supply gas East Coast markets.
'Real Energy and Strata-X Energy's combined interest of 100% in the Project Venus and our broader portfolios enhances the likelihood of the merged entity becoming a meaningful gas operator in the east coast of Australia. Work on the Connor-1 re-entry on Project Venus is expected to commence in the next month, and from an operational perspective, it is business as usual while seeking shareholder approval for the merger. Pure Energy will have exposure to highly prospective and significant projects including Project Venus in the Surat Basin, the Windorah Gas Project in the Cooper Basin, and Serowe Gas Project in Botswana and of course benefit from the opportunities that we are pursuing through Pure Hydrogen. We have lots of optionality to deliver value.'
Ron Prefontaine, Chairman of Strata-X Energy added: 'It is an exciting time to be building a new company - Pure Energy, which will have a meaningful Queensland-focused gas operated business and a great position in the Botswana CSG fairway together with the exciting hydrogen initiatives.
'This transaction plays to Strata-X's strengths of being a low cost and high-impact on-shore exploration and appraisal operator, which makes it an extremely attractive opportunity for both Real Energy and Strata-X Energy shareholders alike.'
Real Energy will prepare a Scheme Booklet and commission an independent experts report for its shareholders. The Scheme requires Real Energy's shareholder approval and Strata-X Energy shareholders' approval for changing the Company name to 'Pure Energy Corporation Limited'.
Conditions precedent
The implementation of the SIA is subject to conditions, including: Real Energy shareholders approving the Scheme at the Scheme meeting; Court approving the Scheme; No adverse Material Adverse Effects in relation to either Real Energy or Strata-X Energy
Strata X Energy delisting its shares from the TSX.V. As Strata-X will remain listed on the ASX, it is not anticipated that majority of the minority shareholder approval will be required in connection with the delisting application; Other customary conditions including satisfaction of regulatory approvals and no legal constraints on completion.
Exclusivity and Break Fees
The SIA contains customary exclusivity provisions including no shop and no talk, a notification obligation and a matching right, subject Real Energy directors' fiduciary obligations where appropriate. The SIA also details circumstances under which Real Energy or Strata-X Energy be required to pay a break fee of $100,000.
No finder's fees are payable in connection with the SIA or the transactions contemplated thereby.
About Strata-X Energy
Strata-X Energy is a Brisbane, Queensland, Australia based company and is engaged in the business of CBM exploration and appraisal in Queensland, Australia and the Republic of Botswana. Strata-X has 112,538,318 common shares outstanding and trades under the symbol 'SXE' on the TSX-V and 'SXA' on the ASX.
About Real Energy Corporation
Real Energy is an Australian east coast focused gas company with interests in the Cooper Basin, Australia's most prolific onshore producing petroleum basin, and the Surat Basin in Queensland. Real Energy has 100% ownership in 2 large permits in Queensland - ATP 927P & ATP1194PA, and a 50:50 JV with Strata X Energy Limited (ASX: SXA) to develop the 154km2 ATP2051 permit in the Surat Basin as a Coal Seam Gas project.
FORWARD-LOOKING STATEMENTS
This news release contains forward-looking statements, which relate to future events or future performance, including but not limited to, the completion and size of the Placement, receipt of regulatory approvals and timing thereof, the Corporation's business strategies and plans for the use of such Placement proceeds, capital expenditure programs and estimates relating to timing and costs, and reflect management's current expectations and assumptions, including, but not limited to the timing and receipt of necessary regulatory approvals and third party approvals and completion of the Placement and stability of general economic and financial market conditions. The use of any of the words 'anticipate', 'continue', 'estimate', 'expect', 'may', 'will', 'project', 'should', 'believe', and similar expressions is intended to identify forward-looking statements. Such forward-looking statements reflect management's current beliefs and are based on assumptions made by and information currently available to the Company. Readers are cautioned that these forward-looking statements are neither promises nor guarantees, and are subject to risks and uncertainties , including imprecision in estimate capital expenditures and operating expenses, stock market volatility, general economic and business conditions in North America and globally, risks associated with liquidity and capital resource requirements, that may cause future results to differ materially from those expected and the forward-looking statements included in this news release should not be unduly relied upon. Those factors are not, and should not be construed as being exhaustive. These forward-looking statements are made as of the date hereof and the Company does not assume any obligation to update or revise them to reflect new events or circumstances save as required under applicable securities legislation. This news release does not constitute an offer to sell securities and the Company is not soliciting an offer to buy securities in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of such jurisdiction.
Contact:
Colin Christensen
Tel: +1 403-483-8363
Email: colin@strata-x.com
PURE HYDROGEN CORPORATION LIMITED 
