Lucas Energy (LEI) to Acquire Producing Properties and Undeveloped Acreage; Includes Mid-Continent Region

Lucas Energy, Inc. (NYSE: LEI) announced that is has signed a purchase agreement to acquire, from 21 different entities and individuals, working interests in producing properties and undeveloped acreage. The assets being acquired include varied interests in two largely contiguous acreage blocks in the liquids-rich Mid-Continent region. The properties currently produce in excess of 1,200 net barrels of oil equivalent per day (BOE/d), of which 53% are liquids from 114 producing wells. The bulk of the production is from the Hunton formation holding approximately 43,000 gross acres (9,900 net acres) in central Oklahoma. Further, offset development drilling opportunities for at least 40 additional wells have already been identified. According to a recent third-party reserve report (as of December 1, 2015), total proved developed reserves (PDP) are 5.4 million barrels of oil equivalent (MMBOE) comprised of 6% oil, 47% natural gas liquids (NGL) and 47% natural gas.

In exchange for the assets being acquired, Lucas will assume $31,350,000 in commercial bank debt, issue 552,000 shares of a newly designated form of convertible preferred stock, issue 13,009,664 shares of common stock, and pay $4,975,000 in cash. At the closing of the transaction, Lucas will rebrand and change its name to Camber Energy, Inc. There are no significant management changes planned at this time as Anthony C. Schnur will maintain his role as President and Chief Executive Officer of the Company. However, the sellers will have the right to appoint three members to the Board of Directors at closing, including Richard N. Azar II. Mr. Azar, the principal seller and manager of the properties, will be appointed as Executive Chairman following the closing. Mr. Azar is a founding partner of Segundo Resources, representative of the sellers, and for over 20 years has been instrumental in developing the Hunton resource play in Central Oklahoma through his direction of Segundo, ownership in Altex Resources, Inc., and various other successful oil and gas ventures.

SAFE-GUARDING THE CAPITAL STRUCTURE

Prior to entering into the acquisition agreement, and as previously disclosed, Lucas has completed the transfer of its existing oil and gas assets and current and outstanding senior debt obligations through a conveyance to a wholly-owned special purpose vehicle (SPV), non-recourse to Lucas Energy, Inc. Lucas's senior lender will maintain its rights to the assets of the SPV. This restructuring allowed Lucas the ability to enter into the acquisition agreement described above in order to pursue its strategic objective of adding significant production and increasing the scope and scale of the Company.

GO FORWARD STRATEGY

"The completion of this transaction will raise the trajectory of opportunities for Lucas, not only as we increase our existing production base and future development opportunities, but also as we expand our reach into a key play in the Mid-continent and broaden our strategic horizons," said Anthony C. Schnur, Lucas's Chief Executive Officer. "We are extremely excited to have identified an acquisition that provides us with stable, long-lived reserves with substantial current production and ample drilling opportunities that are economic in a prolonged depressed commodity price environment. We are further encouraged by the planned upcoming additions to our board, especially the appointment of Richard N. Azar II as our Chairman. I have known Richard over the last three years, and I welcome his depth of knowledge and strategic sense to our Company."

TRANSACTION OVERVIEW

The asset purchase agreement contains customary representations and warranties of the parties and rights of termination. The closing of the acquisition is subject to closing conditions including Lucas placing the commercial bank facility to fund the $4.975 million cash required to acquire the properties; Lucas obtaining stockholder approval for the issuance of the shares of common stock in the closing and upon conversion of the preferred stock; the effectiveness of a registration statement registering the common stock and common stock issuable upon conversion of the preferred stock issued at closing; Lucas's continued listing on the NYSE MKT prior to and following the closing;; and the consent of various creditors of the sellers. The parties are targeting a closing date, subject to the satisfaction or waiver of the required closing conditions, of Lucas's first fiscal quarter of 2016.

Post-closing there will be 14,514,902 shares of common stock issued and outstanding; assuming there are no adjustments through the diligence and closing process. Additionally, the new class of preferred stock to be issued at closing will be convertible into 3,941,280 shares of common stock and will bear a 6.0% annual dividend rate payable in cash, common stock or PIK at Lucas's option. The preferred, which has a face value and liquidation preference of $25 per share, a conversion rate into common stock of 7.14:1, will be convertible at any time at a price of $3.50 per share. Under certain conditions, it will convert automatically.

More information regarding the purchase agreement, planned acquisition and the terms and conditions thereof have been disclosed in the Current Report on Form 8-K filed by Lucas today with the Securities and Exchange Commission.

ROTH Capital Partners acted as financial advisor on the Transaction.

INVESTOR UPDATE CONFERENCE CALL

Management intends to schedule a conference call in the first calendar quarter of 2016 to discuss these developments with investors and further information regarding the call will be disclosed when available.

You May Also Be Interested In

• Baozun Inc. (BZUN) Chairman Issues 2023 Letter to Shareholders
• 23andMe (ME) stock jumps as CEO plans to take company private
• Trump Media & Technology Group (DJT) send letter to Nasdaq over “naked” short selling