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July 2016
Jupiter Energy Limited ("Jupiter" or the "Company")
Ground Floor 10 Outram Street West Perth WA 6005
PO Box 1282
West Perth WA 6872 Tel: +61 8 9322 8222
Fax: +61 8 9322 8244
www.jupiterenergy.com
QUARTERLY UPDATE ON ACTIVITIES FOR THE PERIOD TO 30 JUNE 2016
KEY POINTS:
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5 existing Convertible Notes with a nominal value of $US15.5m plus accrued interest as at 31 May 2016 of $US5,345,753 (total
$US20,845,753) rolled into 4 new Promissory Notes with a repayment date of 1 July 2018.
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1 existing Promissory Note with a face value of $US8,633,333 plus accrued interest as at 31 May 2016 of $US1,250,894 (total
$US9,914,227) rolled into a new Promissory Note with repayment date of 1 July 2018.
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New $US5m Framework Funding Agreement, by way of a new Promissory Note, effective from 24 May 2016 with a repayment date of 1 July 2018.
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Based on a Care & Maintenance budget, new Funding Agreement provides working capital through to at least 30 June 2017.
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Alastair Beardsall retired from the Board on 31 May 2016.
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Appointment of a Business Development Manager in Astana.
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All producing wells, shut in since February 2015, remain closed until domestic oil pricing reaches a level where oil production is cashflow positive.
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Discussions continue with relevant parties regarding the resolution of the Akkar North division of Reserves.
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Steady progress made during Quarter with the application for an Extension of the Exploration Licence.
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Ministry of Energy has given permission to the Company to raise equity via the issue of new shares.
Jupiter Energy Limited (ASX: "JPR", AIM: "JPRL" and KASE: "AU_JPRL") presents the following update on activities for the 3 month period ending 30 June 2016 (the "Quarter"). Also included in this report are details of subsequent events that have occurred up to the date of this release.
The Quarter in brief:
There were no oil sales made during the Quarter. All producing wells were shut in during February 2015, and remain shut in, due to low domestic oil prices.
Outlook for Future Oil Sales:
The Company announced on 19 February 2015 that as a result of the material reduction in world oil prices, the sales price being achieved for domestic oil in Kazakhstan had fallen to levels that made oil production from Block 31 cashflow uncommercial.
The Company therefore decided to cease production from its producing Akkar East wells (J-51 and J-52) until the domestic oil price improved. The Company continues to monitor local pricing on an ongoing basis, and believes that production may recommence if an oil price of at least ~$US12/bbl at the wellhead is achievable but is unable to give any guarantee that oil production will recommence in any specific timeframe.
When production does recommence, the Company also plans to bring wells 19, J-58 and J-59 onto production, assuming the requisite funding is in place to build the appropriate infrastructure at the three well sites.
Funding Update:
The Company announced on 3 June 2016 that it had reached agreement with its Convertible Note holders to rollover the 12,400,000 Convertible Notes with a total value of ~$US20.8m (including accrued interest) into Promissory Notes with a repayment date of 1 July 2018.
The key terms for the new Promissory Notes are:
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Unsecured
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Effective 31 May 2016
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Repayable on 1 July 2018
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Interest rate of 15% pa
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Interest will accrue and be repayable with the principal
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Lenders can elect to be repaid if there is a change of control in Jupiter Energy Limited or Jupiter Energy Pte Ltd or there is a change in control of the ownership of the Block 31 Licence
The Convertible Notes and all accrued interest were due for repayment on 20 September 2016.
The Company also advised that its major shareholder Waterford had agreed to rollover its Promissory Note that as at 31 May 2016, amounted to $US8,633,333 in principal with accrued interest of $US1,250,894 (total $US9,914,227) into a new Promissory Note with the following key terms:
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Unsecured
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Effective 31 May 2016
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Repayable on 1 July 2018
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Interest rate of 15% pa
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Interest will accrue and be repayable with principal
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Lender can elect to be repaid if there is a change of control in Jupiter Energy Limited or Jupiter Energy Pte Ltd or there is a change in control in contract 2275 covering the Block 31 Licence
The Promissory Note and all accrued interest were due for repayment on 1 July 2016.
The Company also advised that Waterford had agreed to put in place a new Framework Funding Agreement that made up to a further $US5m (including accrued interest) available to the Company by way of a new $US5m Promissory Note. As at
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June 2016, the Company has drawn down $US744,989 (including accrued interest) under this new Framework Agreement.
The new Funding Agreement will fund the Company's operations whilst it continues to finalise long term funding arrangements for the development of its Block 31 licence area in Kazakhstan.
The funding arrangement will be the same as the previous one, namely that the Company will request monthly drawdowns against the $US5m amount and the drawdowns will be based on an agreed Care & Maintenance budget.
Based on the current budgeted cashflow requirements, this new funding arrangement will provide the Company with sufficient working capital until at least the end of the 2016/17 financial year (i.e. 30 June 2017).
The key terms of the new Framework Agreement with Waterford are:
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Effective 24 May 2016
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Drawdowns will roll into a Promissory Note
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Promissory Note is repayable on 1 July 2018
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Interest rate of 15% pa
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Interest will accrue and be repayable with principal
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Lender can elect to be repaid if there is a change of control in Jupiter Energy Limited or Jupiter Energy Pte Ltd or there is a
change in control in contract 2275 covering the Block 31 Licence
West Zhetybai Trial Production Licences (wells J-58 and J-59):
In order to get the J-58 and J-59 wells ready for Trial Production, the appropriate surface production infrastructure must be put in place for both wells. This equipment will need to be purchased.
The Company will keep shareholders updated on progress.
Extension of J-50 Trial Production Licence:
The Company advised shareholders on 28 November 2014 that the application to extend the Trial Production Licence for well J-50 was being held by the Kazakh Committee of Geology pending resolution of the allocation of reserves associated with the well.
The J-50 well has been shut in since 29 December 2014 (the date at which the last Trial Production licence expired).
The underlying issue delaying the Trial Production Licence renewal is the demand by the Committee of Geology that Jupiter Energy reach agreement with its neighbour MangistauMunaiGas (MMG) over the division of reserves associated with both companies' share of the Akkar North accumulation. Jupiter Energy has been in dialogue with MMG on this issue for some time but has been unable to reach formal agreement with MMG with respect to the division of Akkar North reserves.
The Company is now seeking legal advice before formally referring the matter of resolving J-50 reserves to a higher authority within Kazakhstan in an effort to bring the matter to a conclusion and will keep shareholders updated on this situation.
Application for an Extension to the Exploration Period:
In late March 2016, the Company submitted a formal application to the Ministry of Energy for a 4 year extension to the Exploration Period on Block 31. The Company had already advised the Ministry of Energy of its intention to lodge an application for an extension to at least 29 December 2018 and the formal application has now been lodged requesting an extension through to 20 December 2020.
The submission followed the guidelines set out by the Ministry of Energy for such an application and the Company believes that it has solid grounds for the extension to be granted taking into account its drilling success in discovering the Akkar East and West Zhetybai oilfields during the current Exploration Period and the fact that it has