Signed agreement on directed issue of SEK 215 million convertible debentures

On 14 June 2013, it was announced that the management of Shelton Petroleum AB
(”Shelton Petroleum”) and the management of Petrogrand AB (“Petrogrand”) had
decided to enter into an agreement regarding two directed issues of convertible
debentures with a combined amount of approximately SEK 215 million and a tenure
to 31 December 2013. The Board of Directors of Shelton Petroleum and Petrogrand
have today signed the agreement, which formally is subject to approval by extra
shareholders’ meetings in Shelton Petroleum and Petrogrand respectively.


 

The convertible debentures

The first convertible, which is unconditional, amounts to SEK 30 million and
both Shelton Petroleum and Petrogrand can call for conversion at a conversion
price of SEK 20. This convertible has a zero coupon rate and is intended to
quickly progress Shelton Petroleum’s operations through production increasing
measures such as further drilling and fracking of wells on the Rustamovskoye
field among others. 

The second convertible amounts to approximately SEK 185 million and is
conditional upon certain events. In addition to raising production, it is
Shelton Petroleum’s strategy and focus to expand its operations. Shelton
Petroleum has identified several attractive opportunities on the markets in
Russia and Ukraine. Petrogrand can call for conversion at a conversion price of
SEK 20 given that certain activities deemed to create substantial value in
Shelton Petroleum are pursued and completed jointly by the companies. The
second convertible has a market based coupon rate corresponding to the deposit
rate, in essence making the net interest rate zero for Shelton Petroleum.

At full conversion, Petrogrand’s ownership in Shelton Petroleum will amount to
50 per cent plus one share. Petrogrand has committed to distribute its shares
in Shelton Petroleum to its shareholders by a Lex Asea dividend.

 

Background and reasons

Shelton Petroleum has during the past few years gradually developed from a pure
exploration company to become an oil producing company. Today, the production
from the two oil fields Lelyaki and Rustamovskoye exceeds 500 barrels per day.
Both fields have a considerable development potential. The operational
achievements are reflected in the financial development. In 2012, the company
doubled its turnover to SEK 100 million and generated a pretax profit of SEK 31
million.

The Board of Directors of Shelton Petroleum and Petrogrand believe that with
external financing Shelton Petroleum can continue to develop its existing
licenses in a beneficial way for shareholders. The proceeds from the issues
will primarily be used for expansion, increase in production of the producing
fields and acceleration of the development of other licenses in the portfolio,
including the offshore fields.

 

Recommendations by the Board of Directors

The Board of Directors of Shelton Petroleum and Petrogrand unanimously
recommend their respective shareholders to vote in favor of the agreement at
the respective extra shareholders’ meetings.

 

Statements by shareholders

Shareholders in Shelton Petroleum representing 25 per cent have irrevocably
committed themselves to vote in favor of the agreement at Shelton Petroleum’s
extra shareholders’ meeting. Shareholders in Petrogrand representing 25 per
cent have irrevocably committed themselves to vote in favor of the agreement at
Petrogrand’s extra shareholders’ meeting.

 

Extra shareholders’ meetings

The agreement is conditional upon the approval by extra shareholders’ meetings
in both Shelton Petroleum and Petrogrand. Notices to extra shareholders’
meetings will be posted separately.

 

Advisors

Pareto Öhman AB is financial advisor and Kilpatrick Stockton is legal advisor
to Shelton Petroleum AB.

 

For more information, please contact:

Robert Karlsson, CEO, Shelton Petroleum, +46 709 565 141

robert.karlsson@sheltonpetroleum.com

www.sheltonpetroleum.com

 

About Shelton Petroleum

Shelton Petroleum is a Swedish company focused on exploring and developing
concessions in Russia and the resource-rich basins of Ukraine. The company
holds three licenses in the Volga-Urals area and has commenced production on
the Rustamovskoye field after a successful exploration program. In Ukraine,
Shelton Petroleum’s wholly owned subsidiary has a joint venture with Ukrnafta
and Chornomornaftogaz, two leading Ukrainian oil and gas companies. The Shelton
Petroleum share is traded on NASDAQ OMX Stockholm under the under the symbol
SHEL B.

Shelton Petroleum is publishing this information in accordance with the Swedish
Financial Markets Act (Sw. Lag om värdepappersmarknaden) and/or the Swedish
Financial Trading Act (Sw. Lag om handel med finansiella instrument). This
information was released for publication on 10 July 2013 at 18:30 CET.