Royale Energy, Inc. (OTCMKTS: ROYL) In $41.5 Million Merger With Matrix Oil


Royale Energy, Inc. (OTCMKTS: ROYL) and Matrix Oil Corp have agreed to come together under one roof as a combined company seeking to create more value for its shareholders in an ongoing basis. But as an investor, you want to know what exactly the merger entails and its ramification on shareholder value.

Assumption of debt

One thing you should know is that Royale Energy, Inc. (OTCMKTS: ROYL) will assume all the debt currently in the name of Matrix. According to a press release announcing the merger agreement, the debt amount that Royale will absorb is about $12.5 million and it relates to secured term bonds.

Issuance of common stock by Royale Energy, Inc. (OTCMKTS: ROYL)

The merge agreement calls for Royale to issue shareholders of Matrix with one share of its common stock for every share of Matrix they hold. Part of the agreement also calls for Royale to issue some 2 million shares convertible preferred stock that has a par value of $10 apiece. But the matter of the convertible stock was not discussed in details and the merger parties are expected to shed more light about it in the future.

A $41.5 million merger transaction

If you consider the shares being issued and the absorption of debt, you find that the value of the merger transaction comes to about $41.5 million. Because shares of Matrix are not publicly traded, it is not clear whether Royale is paying a premium amount for the merger.

What’s Matrix bringing to the table?

According to the Matrix reserve report done by Netherland, Sewell & Associates Inc., the company has 12.2 million barrels of oil equivalents in total proven reserves. The PV10 value of the reserve is cited at $102.8 million. Matrix’s drilling locations are mainly located in the Los Angeles Basin.

Once Royale Energy, Inc. (OTCMKTS: ROYL) and Matrix combined, their daily output is expected to be about 650 barrels of oil equivalents.

Corporate structure

Matrix will operate as subsidiary of Royale Energy, Inc. (OTCMKTS:ROYL) and there will be a bit of board and management shakeup. For instance, the board of the combined company will comprise of four existing board members of Royale and four other members selected by Matrix.

The Royale’s CEO Jonathan Gregory will continue to serve as the CEO the combined company while Matrix’s Johnny Jordan will assume the role of president and COO of the combined company.


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