Fram Exploration raises USD 41.4 million in new equity

March 3, 2014

Fram Exploration ASA (“Fram”) is pleased to announce that it has entered into a Share Subscription Agreement with Loyz Oil Pty Ltd (“Loyz”), on conditions described below. The agreement is subject to Fram shareholders’ approval.

Loyz will contribute with a conversion of its direct stake in the Fram licenses and funds spent on the drilling program of USD 6.5 Million, an additional USD 7 Million in cash and

USD 27.9 million in the form of two drilling rigs (free lease with a call option to buy for USD 1 after 900 days) to a total amount of USD 41.4 Million.

Through this agreement, Loyz will receive a total of 6,288,238 shares in Fram, representing 20% of the outstanding shares post transaction. The transaction will close immediately following an EGM to be held in Fram mid March 2014. The issue of new shares is done at a price of 38 NOK per share, an increase from the previous issue price at 34 NOK per share, constituting a pre-money valuation of Fram of USD 165.6 Million.

In order to be protected against value fluctuations in the rig market, Fram has entered into an option agreement to put the rigs on a third party at a combined consideration of USD 19.52m after 900 days following the transaction.

Fram has previously disclosed that Rex International Holding Ltd (“Rex”) increased its shareholding in Fram through a USD 7 million private placement in November 2013.

Following Loyz’ subscription of shares, both original partners in Fram’s US drilling program have rolled their interest into Fram equity and thus increased their combined exposure from the original funding commitment significantly. Their increased investment in Fram is a testament to the potential of Fram’s reserves and resources documented through the 2013 drilling campaign.

“The completion of the transaction with Loyz allows us to continue with our plan for 2014 and is an important step on the way for Fram to become a listed company in its own right. Loyz has a strong Singaporean footprint with the backing of the Lee family and we look forward to having them as shareholders in Fram”, said Bernt Østhus, Chairman of Fram.

The results of the 2013 drilling campaign gives reason to be optimistic as to the outcome of the 2014 drilling campaign, under which Fram initially will focus on developing the discoveries made in 2013. Although delays and technical problems related to sub-suppliers caused Fram to drill fewer wells than planned, the geological results were highly encouraging. Fram was able to confirm the presence of hydrocarbons in all wells drilled.

Three wells were drilled in Renville County, North Dakota in 2013, to further explore the Mission Canyon formation. The carbonate porosity zones in this area are below normal seismic resolution. Accordingly, the well locations were chosen by structural seismic interpretation and advanced modeling with a high number of existing wells as input. All wells encountered hydrocarbons. In one of the wells, the porous zone was considered to be too thin to produce commercially and this well was plugged and abandoned. The remaining two wells, both in the Schlak area, are under further review for field development. One of the wells is currently test producing approximately 45 barrels per day. As the area had limited seismic data, this well was the only one drilled with Rex’ proprietary Rex Virtual Drilling seismic analysis as support. The Rex Virtual Drilling analysis had, prior to the successful drilling of the well, indicated a positive anomaly on a seismic line marginally offset from the well location.

The wells drilled in North Dakota confirmed the validity of the Rex Virtual Drilling technology, which will be important and a competitive edge for Fram going forward. The Rex Virtual Drilling technology is proprietary to Rex. The technology significantly increases accuracy in predicting drillable prospects based on seismic interpretation. Fram is in the process of securing access to Rex Virtual Drilling through a license agreement with Rex which will be finalized in the near future.

In Whitewater, Colorado, two near horizontal wells were drilled in 2013. Both wells encountered significant amounts of sand, confirming the modeled meandering channel systems. Logs and swabbing documented presence of oil. To date it has not been possible to get the oil to flow. A detailed review of the drilling and completion method indicates that use of water based mud and heavy overpressure in drilling is the probable cause of the lack of flowing oil. A revised drilling and completion plan has been designed for future wells in the area.

In terms of reserves estimates, the drilling results gives basis for a slight upward adjustment in North Dakota and no change in Colorado.