International Petroleum: Quarterly Activities Report for the Quarter Ending 30 September 2013

International Petroleum Limited, an oil and gas exploration company with assets in Russia, Kazakhstan and Niger, is pleased to present its quarterly activities report for the quarter ended 30 September 2013.

HIGHLIGHTS

• US$122,000 cash at bank at 30 September 2013

• Sale of Russian Assets and Kazakhstan Assets for US$60 million cash consideration

• Potential strategic merger with Range Resources Limited

• US$15 million loan from Range Resources Limited

• NSX suspension from official quotation

• Resignation of non-executive directors

CORPORATE Sale of Russian Assets and Kazakhstan Assets for US$60 million cash consideration

On 14 October 2013, the Company announced that it had entered into two binding conditional terms sheets with an unrelated company incorporated in Hong Kong (“Buyer”) to sell its assets in Kazakhstan (“Kazakhstan Assets”) and Russia (“Russian Assets”) for US$60 million.

The sale of the Russian Assets is expected to complete by 30 November 2013 and the sale of the Kazakhstan Assets is expected to complete by 30 April 2014 (on receipt of Government Approval).

The Company will apply the funds received from the transactions towards payment of creditors and loans, general working capital and future exploration expenditure on its Niger licence blocks. The Company has sent a notice of general meeting to be held on 15 November 2013 to seek the approval of its shareholders for the sales of the Kazakhstan Assets and Russian Assets.

Potential strategic merger with Range Resources Limited

On 24 April 2013, Range Resources Limited announced (“RRS Announcement”) its intention to undertake a strategic merger to acquire all of the issued shares in International Petroleum (“Merger”) by offering three Range shares for every two International Petroleum shares (“Offer”).

On 17 June 2013, Range announced that the Offer is likely to be conducted as an off-market takeover offer by Range to International Petroleum shareholders.

However, on 14 October 2013, Range announced that it “will now identify and consider a range of corporate alternatives to the original merger proposal, which may or may not include a merger of the two companies – albeit on terms to be renegotiated” and the Company will continue to negotiate with Range.
US$15 million loan from Range Resources Limited

During April 2013, Range agreed to advance a total of US$15 million to International Petroleum by way of a secured loan (“Loan”).

To date, Range has advanced a total of approximately US$8 million to International Petroleum by way of the Loan and Range has indicated that, once it receives further cash from some transactions that are nearing completion, it would be able to advance further amounts under the Loan to the Company.

Amounts drawn under the Loan have been, and will continue to be, used to pay the Company’s trade creditors and meet working capital requirements and will attract interest at the rate of 8% per annum and will be repayable by the earlier to occur of (a) 30 April 2014 and (b) in the event of a default by International Petroleum, five business days after the date on which International Petroleum receives a notice from Range requesting repayment.

NSX suspension from official quotation

Since 27 March 2013, the Company’s shares have been suspended from trading on the NSX market, at the Company’s request, and suspension from trading is not expected to be lifted until the sale of the Russian Assets has been completed and the Company has filed its half year report for the 6 months ended 30 June
2013.

Resignation of non-executive directors

During August 2013, Mr Antonio (Tony) Antoniou, Mr Pierre Godec and Mr Vladimir Mangazeev resigned as non-executive directors of the Company. Given that, in order to minimise cash outflows, the Company had temporarily ceased its oil and gas exploration and production activities and that it was in discussions with a third party concerning a potential sale of its Russian assets for cash consideration, the three non-executive directors resigned in order to save costs and reflect that their industry expertise was no longer being utilised by the Company.

Extended repayment dates of convertible loans

The Company has extended the repayment date of three of its convertible loans to the earlier of: (a) 31 December 2013,
(b) the date on which an event of default occurs; and
(c) any other date agreed between the parties (the “Repayment Date”).
The three convertible loans are owed by the Company to Varesona Participation Corporation, an entity controlled by Frank Timis, a non-executive director and have the following terms:

31 October 2013

1) Loan agreement dated 6 August 2012 – amount borrowed US$2,000,000 – interest rate of 5% per annum – originally repayable by the Company 12 months from the date of the agreement. If the amount borrowed and interest owed (together the “Amount Outstanding”) is not repaid by 31
December 2013, the Amount Outstanding will be converted, subject to the receipt of all necessary shareholder approvals, into shares at a deemed issue price equal to A$0.15 per share.
2) Loan agreement dated 14 September 2012 – amount borrowed US$2,000,000 – interest rate of 5% per annum – originally repayable by the Company 12 months from the date of the agreement. If the Amount Outstanding is not repaid by the Repayment Date, the Amount Outstanding will be converted, subject to the receipt of all necessary shareholder approvals, into shares at a deemed issue price equal to A$0.15 per share.
3) Loan agreement dated 16 October 2012 – amount borrowed US$2,000,000 – interest rate of 5% per annum – originally repayable by the Company 12 months from the date of the agreement. If the Amount Outstanding is not repaid by the Repayment Date, the Amount Outstanding will be converted, subject to the receipt of all necessary shareholder approvals, into shares at a deemed issue price equal to A$0.15 per share.
If all necessary shareholder approvals for the conversion of the Amount Outstanding into shares are not obtained, the Company must satisfy the Amount Outstanding in cash and not shares. To allow the Company the future flexibility to determine whether to satisfy the Amount Outstanding in cash or shares, the Company plans to seek all necessary shareholder approvals for the conversion of the Amount Outstanding into shares prior to the Repayment Date.