17 June 2020

TOMCO ENERGY PLC

("TomCo" or the "Company")

Placing, JV agreement with Valkor and Grant of Options

TomCo Energy plc (AIM: TOM), the oil exploration, development and technology group focused on using innovative technology to unlock unconventional hydrocarbon resources, is pleased to announce that it has:

·        Raised £1,500,000 (gross) by way of a placing ("Placing") at a price of 0.4 pence per share

·        Received a preliminary draft of the Pre-Feed study on Petroteq Energy Inc's ("Petroteq") closed loop system for use in the recovery of oil from oil sands (the "Oil Sands Technology")

·        Established a joint venture company, Greenfield Energy LLC ("Greenfield"), with Valkor LLC ("Valkor") to pursue the development of an oil sands plant

-   Valkor has entered into an agreement with Petroteq (the "Work Order"), which will be transferred to Greenfield, for Valkor to take over the management and operations of Petroteq's existing oil sands plant at Asphalt Ridge, Utah (the "POSP"), pursuant to which Greenfield will undertake certain upgrades to the POSP and run associated tests to demonstrate the POSP's commerciality

·        Granted, in aggregate, 14,000,000 options to the Directors

Placing

The Company is pleased to announce that it has raised £1,500,000 (gross) pursuant to the Placing, through the issue of 375,000,000 new ordinary shares of no par value in the Company ("Ordinary Shares") ("Placing Shares") at a price of 0.4 pence per Placing Share ("Placing Price") through Turner Pope Investments (TPI) Ltd ("TPI"), the Company's broker.  The Placing Shares represent approximately 136% of the Company's current issued share capital.

Every two Placing Shares have one warrant attached, resulting in the issue of 187,500,000 warrants, with each warrant having the right to acquire one new Ordinary Share at an exercise price of 0.8 pence for a period of two years from the date of the admission of the Placing Shares (the "Warrants").  If the Warrants are exercised in full, this would result in the issue of 187,500,000 new Ordinary Shares, which would represent approximately 28.8% of the Company's issued share capital as enlarged by the Placing.

The net proceeds of the Placing, together with the Company's existing cash resources, will be used to provide sufficient funds to Greenfield in order to, inter alia, undertake the POSP upgrades and complete the associated tests, together with funding TomCo's contribution to the FEED and to provide general working capital to the Group.

The Company has also issued 22,500,000 warrants to TPI, giving them the right to acquire such number of new Ordinary Shares at an exercise price equal to the Placing Price for a period of two years.

Pre-FEED study

Further to the announcement of 19 March 2020, the Company is pleased to announce that it has received a preliminary draft of the Pre-FEED study from Valkor, which seeks to demonstrate the economic viability of the Oil Sands Technology.  The Board of TomCo believes that the draft Pre-FEED study indicates that the use of the Oil Sands Technology is likely to be economically viable.

The draft Pre-FEED study sets out the design criteria, including the environmental and regulatory compliance and codes and standards required, the product specifications of the feed stock, sales oil and effluent solids, the process systems, the safety systems, the civil and structural requirements and the mechanical, electrical and instrumentation and control requirements, for a commercial scale 10,000 barrels of oil per day ("bopd") oil sands plant.

Valkor Joint Venture

The results of the draft Pre-FEED study have provided the TomCo Board with sufficient comfort to enter into a binding joint venture agreement with Valkor (the "JV Agreement") to form and regulate the operations of Greenfield, a newly incorporated Utah registered company that will seek to pursue the development of a plant utilising the Oil Sands Technology.  Greenfield is equally owned by TomCo and Valkor, with a director from each being appointed to Greenfield's board, being John Potter and Steve Byle respectively.

Under the terms of the JV Agreement, the Company will provide funding to Greenfield, subject to being satisfied as to the use of such funds, of up to US$1.5 million, to enable Greenfield to be able to complete, inter alia, the required upgrades to the POSP and to undertake the proposed test programme as detailed below, together with funding TomCo's contribution to the FEED.  Valkor will provide the engineering knowhow pertaining to the Oil Sands Technology required to complete the changes and will undertake the work detailed in the Work Order.  Valkor will provide the services for the completion of the pre-FEED and the FEED up to a value of US$375,000, along with their management and operating experience and any other information and other valuable resources owned by ‎and/or controlled by Valkor.  In addition, Valkor has granted to Greenfield a licence to the Quadrise MSAR® technology, for the processing of heavy sweet crude into heavy fuel oil for which it has a right to an exclusive licence, for the use on all future plants that are majority owned and operated by Greenfield in Utah.

Pursuant to the Work Order, Valkor has recently entered into an agreement to take over the management and operations of the POSP, for an initial 12 month period, to ensure the proposed upgrade works, as detailed below, can be completed in as short a period as possible.  With the establishment of Greenfield, Valkor will now transfer the Work Order to it.

Pursuant to the Work Order, Greenfield intends to utilise the existing knowhow of Valkor to upgrade the POSP, in order to carry out small scale test operations, so as to assist with the determination of the design of a scaled version of a commercial scale plant.  The most significant upgrade to the POSP will be the addition of the Quadrise MSAR® process, which will seek to further process the oil into a premium, heavy fuel oil product for retail sale as IMO 2020 compliant bunker fuel or as No. 6 diesel for heavy machinery.  The aim of the upgrade works is to increase the POSP's capacity to 500 bopd and to run it for a sufficient period of time for the design to be reviewed and the operations verified by third party engineers.  On completion of this work, it is intended that a FEED will be completed for a commercial scale (up to 10,000 bopd) oil sands plant.

In addition, Valkor has entered into a new lease, effective from 1 July 2020 and for a term of 12 months, with the landlord of the POSP site, which will allow Valkor access to the land to be able to operate the POSP to undertake the necessary upgrades and tests as well as to mine for feedstock for the POSP.  Pursuant to the lease, in addition to a monthly rent, the landlord will be entitled to certain royalty payments in respect of any commercial produce from the POSP and/or associated operations.  Valkor has also granted Greenfield the right to occupy the site to complete the upgrade works and operations of the POSP proposed under the Work Order.

Under the JV Agreement, Valkor has granted a licence, for the use on all future plants that are majority owned and operated by Greenfield in Utah, to its existing Intellectual Property ("IP") and knowhow to Greenfield of the processing of oil sands into heavy fuel oil.  All modifications and improvements to the IP developed in Greenfield, including in relation to the upgrade of the POSP, will belong to Greenfield, which the Board of TomCo believes will allow Greenfield to develop its own oil sands plant, subject to identifying a suitable location.  Greenfield will seek to identify and secure suitable locations in Utah for a commercial scale (up to 10,000 bopd) oil sands plant.

Further information on the POSP, the Oil Sands Technology and the Quadrise MSAR® process

The POSP and Oil Sands Technology has been in development by Petroteq for a number of years, to determine a clean and environmentally friendly method of producing heavy fuel oil from oil sands.  The system contains several parts: a front end, where ore is crushed and mixed with solvent; a middle section, for the separation of liquids and sand; and a back end to recover the solvent for reuse, produce a saleable bitumen product and return a hydrocarbon-free sand.

In 2018, Petroteq entered into a management services agreement with Valkor, to bring Valkor's process engineering experience in to help the design process.  The work began with a redesign of the back end to increase reliability and capacity, resulting in a 12 API, ultra-low BS&W, heavy oil product with almost no sulphur.  Further work continued through to the end of 2019, to improve the middle section efficiency for sand and oil separation while reaching steady production at rates as high as 300 bopd.

In order to complete the necessary upgrade to the POSP needed to be able to demonstrate its commerciality, as well add the Quadrise MSAR® process, and to be able to run the necessary tests, Valkor has taken over the management and operations of the POSP under the Work Order.  Any IP developed as result of the upgrade and from the tests to be run will be the property of Greenfield.

The inclusion of the Quadrise MSAR® process, developed by Quadrise Fuels International plc, is intended to demonstrate the economic opportunity presented by the low sulphur, heavy oil produced by the oil sands plant.  The heavy oil is mixed with water and chemicals to produce an emulsified heavy fuel oil, expected to qualify for use as an IMO 2020 low sulphur fuel oil directly from the plant, meaning no further refinement will be needed.  It may also find local sale as a diesel replacement for medium speed engines, boilers and other heavy machinery.  This type of low-sulphur, heavy oil-based product has come into high demand with changing regulation and reduced production of heavy oil around the world.

Grant of Options

The Company announces it has granted options ("Options") to subscribe for, in aggregate, 14,000,000 new Ordinary Shares to the Directors.

The Options have been granted to the Company's Executive Director, John Potter, under an Enterprise Management Incentives Share Option Plan ("EMI Scheme") and to the Company's Non-executive Directors under an unapproved scheme and have an exercise price of 0.6 pence per share, being the closing price on the date of grant.

Following this grant of the Options, the Directors will be interested in the following number of Ordinary Shares and options:

The Options are exercisable for five years from the date of vesting and will vest on the following basis:

·        One-half on or after 30 November 2020; and

·        One-half on or after 31 May 2021.

The 14,000,000 Options represent, in aggregate, approximately 5.1% of the Company's current issued share capital and 2.2% of the Company's issued share capital as enlarged by the Placing.

Admission

The Placing is subject to normal conditions including, inter alia, admission of the Placing Shares to trading on AIM.

The Placing Shares will rank pari passu with the existing Ordinary Shares and application will be made for the Placing Shares to be admitted to trading on AIM ("Admission").  It is expected that Admission will become effective and dealings in the Placing Shares will commence at 8.00 a.m. on 23 June 2020.

Following Admission, the Company's issued share capital will consist of 650,759,235 Ordinary Shares with voting rights.  There are no Ordinary Shares held in treasury.  The figure of 650,759,235 may be used by shareholders, following Admission, as the denominator for the calculations by which they will determine if they are required to notify their interest in, or a change to their interest in, the share capital of the Company under the Financial Conduct Authority's Disclosure Guidance and Transparency Rules.

John Potter, CEO, commented: "We are delighted that the preliminary results of the Pre-FEED study are favourable, and following completion of the Placing, we can now move forward with our joint venture with Valkor, to seek to demonstrate the commerciality of the Oil Sand Technology.

"We believe there is significant potential upside and look forward to keeping shareholders updated as we move forward with the upgrades to the POSP."

Enquiries:

TomCo Energy plc

Stephen West (Chairman) / John Potter (CEO)                   +44 (0)20 3823 3635

Strand Hanson Limited (Nominated Adviser)

James Harris / Richard Tulloch / Jack Botros                          +44 (0)20 7409 3494

Turner Pope (Broker)

Andy Thacker / Zoe Alexander                                                   +44 (0)20 3657 0050

For further information, please visit www.tomcoenergy.com.

This announcement contains inside information for the purposes of Article 7 of the Market Abuse Regulation (EU) No 596/2014.

The notification below, made in accordance with the requirements of the EU Market Abuse Regulation, provides further detail:

NOTIFICATION AND PUBLIC DISCLOSURE OF TRANSACTIONS BY PERSONS DISCHARGING MANAGERIAL RESPONSIBILITIES AND PERSONS CLOSELY ASSOCIATED WITH THEM