Trillion Energy International Inc (CSE:TCF) (OTCMKTS:TCFF) (FRA:3P2N) has signed a letter of intent (LOI) with a US investment fund to obtain up to US$17.5 million in new financing.
In a statement, the company said the funds will be used to finance the development of new producing gas wells on the South Akcakoca Sub-Basin (SASB) natural gas field, Black Sea.
Trillion Energy added that the LOI is subject to due diligence, where the company and investor will work towards definitive agreements to bring the financing to fruition.
READ: Trillion Energy kicks off work program to expand SASB license area in the Black Sea
The planned financing includes an overriding royalty on gas and oil production and a convertible debt scheme and includes:
- A royalty sale for net proceeds to the company of US$4.5 million in exchange for an overriding royalty interest (ORRI) in the natural gas and oil production at both of the company’s Cendere Oil Field and SASB Gas Fields;
- The ORRI is 5% on the company’s net interest in the Cendere Oil Field production and 3% on the SASB Gas Field production net to the company. The ORRI is extinguished upon accumulated ORRI payments of US$16 million; and
- The LOI includes a draw-down loan facility for up to US$13 million, which will be repayable in equal installments over a 36-month period and bears an interest rate of 13% per annum. The loan facility may be prepaid at the election of the company after 12 months.
The company also said the loan facility includes:
- A first advance on the loan facility in the amount of US$3.5 million payable immediately upon closing, to be used for working capital, general corporate purposes, and for funding development expenditures on the SASB gas field;
- The first advance is convertible at the election of the investor into the company's common stock at US$0.28 per share during the term in which the loan facility is outstanding;
- Subsequent advances on the loan facility for up to US$9.5 million available to the company prior to, but not after the date, that is 30 days prior to the maturity of the loan facility, and where each drawdown by the company may not be less than US$1.5 million; and
- The loan facility advances may be used solely by Trillion Energy for the purpose of funding development expenditures on its assets located in the SASB Gas Field and must be expended 12 months of each respective draw being made.
“The combined debt and royalty financing is designed to realize the significant potential revenue stream from the SASB gas field and to minimize dilution to our existing shareholders from obtaining capital to do so,” said CEO Arthur Halleran. “We are hopeful to close the financing and move forward into redevelopment this year.”
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—Updating with corrected company statement—