14 August 2024

TOMCO ENERGY PLC

("TomCo" or the "Company")

Proposed Redemption of Greenfield's 10% Membership Interest in TSHII

TomCo Energy plc (AIM: TOM), the US operating oil development group focused on using innovative technology to unlock unconventional hydrocarbon resources, announces that the Company's wholly owned subsidiary, Greenfield Energy, LLC ("Greenfield"), entered into an agreement on 12 August 2024 (the "Side Agreement") with Tar Sands Holdings II, LLC ("TSHII") and Endeavor Capital Group LLC ("Endeavor"), which holds 90% of TSHII's membership interests, with respect to the proposed redemption of Greenfield's 10% membership interest in TSHII for an aggregate purchase price of US$1,575,000 (approximately £1,234,000) (the "Proposed Redemption") under a proposed redemption agreement ("Redemption Agreement").  TSHII, Greenfield and Endeavor concurrently entered into a Second Amended and Restated Operating Agreement (the "Revised Operating Agreement") to facilitate a buyout of TSHII's interests by a third party buyer, IRRX (as described further below).

Pursuant to the terms of the Side Agreement, both TSHII and IRRX (defined below) have agreed not to terminate an existing lease between AC Oil LLC ("AC Oil"), a wholly-owned subsidiary of Greenfield, and TSHII (the "Lease"), and to negotiate in good faith with Greenfield with respect to entering into an additional  lease for mining rights on land owned by TSHII  (the "Additional Lease").  Accordingly, Greenfield should be able to continue to pursue its existing tar sands development project and potential in-situ well programme, subject to securing the requisite additional funding and permitting going forwards, post completion of the proposed transaction.  

The Proposed Redemption stems from a recent approach to Endeavor by Integrated Rail and Resources Acquisition Corp. (OTC: IRRX) ("IRRX") expressing interest in potentially acquiring 100% of TSHII by way of a merger.  IRRX is a blank check company formed for the purpose of effecting a merger, share exchange, asset acquisition, stock purchase, reorganisation, or similar business combination with one or more businesses with a particular focus on natural resources, railroads and/or railroad logistics companies or any combinations thereof.

The Proposed Redemption is conditional on the prior approval of TomCo's shareholders pursuant to the provisions of Rule 15 of the AIM Rules for Companies and the net proceeds will be utilised to settle the group's outstanding trade creditors and provide additional working capital.  

Background Information on TSHII and Existing Lease Arrangement

TSHII is a private US company formed by Utah-based Endeavor in which Greenfield acquired a 10% membership interest in November 2021 for a total consideration of US$2m.  Until 31 December 2023, Greenfield also held an option to potentially purchase Endeavor's remaining 90% membership interest in TSHII for certain additional cash consideration.  Such option had been extended and varied several times.  TSHII owns approximately 760 acres of land and associated rights and certain non-producing historic infrastructure, plant and equipment in Uintah County, Utah, USA (the "Site").

In addition to the 10% membership interest held by Greenfield, AC Oil entered into a lease ("Lease") with TSHII in respect of approximately 320 acres of the Site (the "Lease Area") for an annual rental of US$320, together with a 12% of net sales royalty per barrel of conventional oil, gas or sulphur produced and removed from the Lease Area.   

The Lease grants AC Oil the exclusive right to explore, drill and mine for, and extract, store, and remove oil, gas, hydrocarbons, and other associated substances on and from the Lease Area, together, inter alia, with the right to erect, construct and use such plant and equipment and infrastructure as required. The Lease is for an initial term of 10 years and will continue thereafter for so long as any oil, gas or other hydrocarbons are being produced from the Lease Area or drilling operations are being prosecuted or as the parties may agree.

For the twelve month period to 31 December 2023, TSHII incurred an unaudited loss after tax of approximately US$25,000.  In the Company's audited annual report and final statements for its financial year ended 30 September 2023, the group's carrying value for its 10% membership interest in TSHII was approximately £1.64m.

Principal Terms of the Proposed Redemption

Redemption Agreement and Side Agreement

The Proposed Redemption is anticipated to be consummated by a Redemption Agreement to be entered into between Greenfield, Endeavor and TSHII for the proposed redemption by TSHII of Greenfield's entire 10% membership interest in TSHII immediately following receipt of the approval of TomCo's shareholders at a duly convened general meeting.  Following such redemption, TSHII plans to complete a merger transaction with IRRX and its affiliates pursuant to a business combination agreement and related documents, entered into on 12 August 2024, subject to NASDAQ exchange regulatory approvals, the approval of the transaction by the shareholders of IRRX and the satisfaction or waiver of other customary closing conditions.

By way of the Side Agreement entered into between Greenfield, Endeavor and TSHII on 12 August 2024, subject to TomCo's shareholders' consent, Greenfield (a) has agreed to waive any of its rights to prevent Endeavor selling its 90% membership interest in TSHII to IRRX and (b) has granted to TSHII the irrevocable, unrestricted and unconditional right to redeem Greenfield's 10% membership interest for an aggregate cash consideration of US$1,575,000 and the promise to negotiate terms for the Additional Lease.  The consideration shall be satisfied as to US$100,000 on execution of the Side Agreement, which is non-refundable, with the balancing US$1,475,000 (the "Second Tranche Funds") to be held in escrow pending receipt of TomCo's shareholders' approval, all pursuant to the terms of the Redemption Agreement.

In addition, TSHII and IRRX have committed (a) not to terminate the Lease and (b) to use best efforts to negotiate in good faith to enter into the Additional Lease to provide mining rights for Greenfield on land owned by TSHII, save for that part occupied by an historic refinery which is currently intended to be optimised and reactivated by IRRX (or such other entity established for such purpose), on customary terms but specifically involving: a  lease withrights and access to mine tar sands, and a right to set up a processing plant for tar sands.   

The board of TomCo ("TomCo Board") firmly believes that IRRX's intentions for the Site will not conflict with Greenfield's existing plans, with potential scope for close co-operation for mutual benefit.

The agreement contains certain representations, warranties and indemnities between the parties of a type commonly found in agreements of this nature.  In the event that TomCo's shareholders' do not approve the Proposed Redemption, TomCo would need to secure alternative funding to satisfy its group's working capital requirements.  There can be no guarantee that alternative funding can be secured on a timely basis or as to the terms of any such alternative financing.

Revised Operating Agreement

The Revised Operating Agreement has been entered into by Greenfield, Endeavor, and TSHII in respect of TSHII in order to provide exclusive management rights to Endeavor for a limited period and for the limited purpose of facilitating consummation of the proposed merger transaction between TSHII and IRRX.  Such rights shall become null and void in the event (i) the merger agreement is terminated; or (ii) TomCo fails to secure the requisite shareholder approval.  In such event, the operating agreement existing immediately before the Revised Operating Agreement shall be reinstated.  The agreement contains certain representations and warranties from Greenfield to TSHII and Endeavor customary for an agreement of this nature. 

General Meeting

In light of its size, the Proposed Redemption, which is unanimously recommended by the TomCo Board, constitutes a fundamental change of business pursuant to the provisions of Rule 15 of the AIM Rules for Companies, and is therefore subject to the approval of TomCo's shareholders at a duly convened general meeting.  Accordingly, the Company will shortly make a further announcement with respect to the publication of a circular incorporating a formal notice of general meeting and customary salient information with regards to seeking such shareholder approval which, once published, will be made available on the Company's website at www.tomcoenergy.com.   

In the event that TomCo's shareholders' approval is not forthcoming, the proposed transaction will terminate and the TomCo Board would need to secure alternative funding to satisfy the group's working capital requirements.  There can be no guarantee that alternative funding could be secured on a timely basis or as to the terms of any such alternative financing and the TomCo Board strongly believes that it is in best interests of the Company and its shareholders as a whole to exit from its minority interest in TSHII for wholly cash consideration whilst retaining access to the Site and mining rights via the existing Lease and proposed Additional Lease, which will enable the Company to continue to pursue its tar sands development project subject to funding and permitting

Suspension of Trading on AIM

Further to the Company's announcement of 28 June 2024, trading in the Company's ordinary shares on AIM will remain suspended pending successful completion of the Proposed Redemption, and receipt of the Second Tranche Funds, which will then enable finalisation of the Company's unaudited interim results for the six-month period ended 31 March 2024 (the "2024 Interim Results").  Accordingly, it is currently expected that suspension from trading will be lifted upon publication of the 2024 Interim Results shortly following receipt of shareholder approval and completion of the Proposed Redemption.

Commenting today, Malcom Groat, Chairman of TomCo, said:

"Whilst it is clearly disappointing that we have been unable to secure funding to procure 100% of TSHII, despite a number of extensions to our previously agreed option arrangement with Endeavor, the Proposed Redemption, if successfully concluded, will enable us to exit our minority investment and provide funds to settle outstanding trade creditors and sufficient working capital to finalise and release the group's 2024 Interim Results. 

Furthermore, the planned negotiation and entry into of the Additional Lease will enable us to continue to pursue our tar sands development project and potential in-situ well programme subject to securing the requisite additional funding and permitting in due course." 

Enquiries:

TomCo Energy plc

Malcolm Groat (Chairman)                                                       +44 (0)20 3934 6630

Strand Hanson Limited (Nominated Adviser)

James Harris / Matthew Chandler                                             +44 (0)20 7409 3494

Novum Securities Limited (Broker)

Jon Belliss / Colin Rowbury                                                        +44 (0)20 7399 9402

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

The information contained within this announcement is deemed by the Company to constitute inside information as stipulated under the Market Abuse Regulation (EU) No. 596/2014 as it forms part of United Kingdom domestic law by virtue of the European Union (Withdrawal) Act 2018, as amended by virtue of the Market Abuse (Amendment) (EU Exit) Regulations 2019.