Royale Energy signs Letter of Intent to merge with Matrix Oil

Royale Energy Inc. (OTCQB:ROYL) and privately held Matrix Oil Corp. have entered into a Letter of Intent to merge in a combined stock and assumption of debt transaction. The $41.5 million transaction remains subject to completion of due diligence reviews and customary definitive documentation and the approval of the shareholders of both companies. The companies seek to complete the merger in the fourth quarter of 2016.

As of March 31, 2016, Matrix had total proved reserves of 12.2 million barrels of oil equivalent with a PV10 value of $102.8 million based on SEC Pricing. The Matrix reserve report prepared by Netherland, Sewell & Associates Inc. includes over 80 proven undeveloped drilling locations mostly in the Los Angeles Basin. At closing, the combined company should have estimated daily production of approximately 650 barrels of oil equivalents per day. The company will retain the Royale Energy name with Matrix becoming a wholly owned subsidiary of Royale. Matrix will continue to operate from its current Santa Barbara, CA office.

In the proposed merger, Royale will issue one share of common stock for each share of common stock outstanding at the time of the execution of definitive documents, assume all of Matrix’s $12.5 million of secured term debt, and issue 2,000,000 shares of convertible preferred stock with a par redemption value of $10.00 per share. Assuming a $0.50 price per common share, the transaction is valued at approximately $41.5 million. The final terms of the new convertible shares will be available upon the execution of the forthcoming definitive documents.

Upon consummation of the transaction, Jonathan Gregory will continue to serve as CEO of Royale and Johnny Jordan will become president and COO. Don Hosmer will continue to head business development for Royale’s Direct Working Interest line of business and Stephen Hosmer will continue to serve as Royale’s CFO.

The board of the combined company will be comprised of four members from the current Royale board and four members to be appointed by Matrix. Two of the Matrix appointees will be Johnny Jordan and Jonathan Clarkson. Clarkson brings over 40 years of oil and gas industry expertise to the Royale board. He will serve alongside Harry Hosmer as non-executive co-chairman until Hosmer’s retirement. The reconstituted board will meet all of the independent director requirements of NASDAQ.  

Legal counsel to Royale in the transaction is Strasburger & Price, LLP. Legal counsel to Matrix in the transaction is Porter & Hedges LLP. Northland Capital Markets has been retained to serve as financial advisor to Royale.

Founded in 1986, Royale Energy Inc. (OTCQB:ROYL) is an independent exploration and production company focused on the acquisition, development, and marketing of natural gas. Royale Energy has its primary operations in the Sacramento and San Joaquin basins in California.

Matrix Oil Corp. is a private independent oil and natural gas production company based in Santa Barbara, CA. Currently, the company owns and operates oil-producing properties in the Los Angeles and San Joaquin Basins of California. It owns natural-gas producing properties in the Sacramento Basin and oil-producing royalty and non-operated properties in the Permian Basin of West Texas. In these focus areas, Matrix has lease and fee ownership in 15 producing fields in approximately 28,000 acres that hold in excess of 200 Matrix-interest wells.

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