Longreach Announces Closing of $9,700,000 Non-Brokered Private Placement

SAINT HELIER, Jersey, April 10, 2014 /PRNewswire/ - LONGREACH OIL AND GAS LIMITED (TSXV: LOI) (the "Company" or "Longreach") is pleased to announce that it has closed today a non-brokered private placement of units with investors for aggregate gross proceeds to the Company of $9,700,000 (the "Private Placement").  The subscription price per unit was $1,000 and each unit consisted of one 10% secured convertible debenture of the Company in the principal amount of $1,000 (collectively, the "Debentures") and 1,000 ordinary share purchase warrants (collectively, the "Warrants").

Net proceeds of the Private Placement will be used to support the ongoing drilling of the Company's Kamar well at Sidi Moktar and for general corporate and administrative purposes.  The completion of the Private Placement (described initially in the Company's press release dated March 3, 2014) will permit the Company to continue with its contracted drilling activities of the Kamar well at Sidi Moktar.  The Company intends to refinance or repay the indebtedness under the Debentures through the proceeds of a subsequent public or private offering of equity securities, which may include a rights offering to all shareholders of the Company.

The Debentures mature two years from the date of closing and bear interest at a rate of 10% per annum, payable quarterly in arrears.  Following the first anniversary of the date of closing, holders of Debentures may convert from time to time, in whole or in part, outstanding principal under the Debentures into ordinary shares of the Company ("Shares") at a conversion price equal to the greater of: (a) $0.30 (subject to typical adjustments in certain circumstances); and (b) the current market price of the Shares at the time of conversion (based on the volume weighted average trading price of the Shares for the 20 trading days ending on the fifth trading day preceding the date of conversion).  Holders of Debentures are restricted from converting Debentures without the approval of the TSX Venture Exchange if, as a result of conversion, the holder would hold more than 20% of the issued Shares.  In addition, following the first anniversary of the date of closing, the Company may redeem from time to time, in whole or in part, outstanding principal under the Debentures for cash at a redemption price equal to the face value of the principal amount being redeemed, plus an amount equal to three months of interest calculated on the amount of Debentures being redeemed.

The obligations of the Company under the Debentures are secured by a security interest in the Company's present and after acquired property and, in connection therewith, the Company and holders of Debentures have executed a general security agreement under the laws of Jersey (Channel Islands) providing a security interest in favour of the Debenture holders.

The Debentures provide customary events of default including failure to pay interest when due within 30 days, failure to repay principal on redemption or maturity, and the occurrence of insolvency events or proceedings.  In addition, the Company has made certain covenants in favour of holders of Debentures, including covenanting not to incur additional indebtedness, covenanting to use commercially reasonable efforts to complete an equity financing within one year for the purpose of repaying or refinancing the Debentures, and covenanting to use commercially reasonable efforts to seek shareholder approval in certain circumstances for the creation of a new control person, if requested by a holder of Debentures who would otherwise need such approval in order to permit the full conversion of Debentures.

Each Warrant is exercisable for a term of two years following closing and may be exercised for one Share at an exercise price of $0.30 per Share (subject to typical adjustments in certain circumstances).  Holders of Warrants are also restricted from exercising Warrants without the approval of the TSX Venture Exchange if, as a result of exercise, the holder would hold more than 20% of the issued Shares.

A commission in the amount of $315,800, representing approximately 3.26% of the gross proceeds, is payable to a finder in connection with the Private Placement.

Two of the investors in the Private Placement, being Dundee Corporation ("Dundee") and funds advised by West Face Capital Inc. ("West Face"), are significant shareholders of Longreach, holding 12,291,146 Shares (representing approximately 15.15% of the issued Shares) and 8,571,453 Shares (representing approximately 10.56% of the issued Shares), respectively.  Accordingly, the participation of these insiders in the Private Placement is considered a "related party transaction" pursuant to applicable securities laws and the policies of the TSX Venture Exchange (the "TSXV").

Dundee subscribed for a total of 2,820 units comprised of $2,820,000 principal amount of Debentures and 2,820,000 Warrants.  Assuming Dundee fully converted the principal of the Debentures at the minimum conversion price of $0.30 and fully exercised its Warrants at $0.30 per Warrant, and assuming there was no restriction on conversion and exercise as discussed above, Dundee would hold 24,511,146 Shares representing approximately 26.25% of the issued Shares (calculated on a partially diluted basis).

West Face subscribed for a total of 1,880 units comprised of $1,880,000 principal amount of Debentures and 1,880,000 Warrants.  Assuming West Face fully converted the principal amount of the Debentures at the minimum conversion price of $0.30 and fully exercised its Warrants at $0.30 per Warrant, West Face would hold 16,718,119 Shares representing approximately 18.72% of the issued Shares (calculated on a partially diluted basis).

The Private Placement was unanimously approved by the board of directors of the Company (the "Board"), excluding two directors who, as a result of their position with the participating insiders, declared their interest in the Private Placement and abstained from voting.  The Board has determined that the fair market value of the consideration for, and the subject matter of, the Private Placement, as it relates to the participation by related parties, is less than 25% of the Company's market capitalization.  Accordingly, the Company is exempt from the requirement to obtain a formal valuation and minority shareholder approval for the Private Placement.  The Company did not file a material change report at least 21 days prior to the closing of the Private Placement because the participation of, and subscription agreements with, participating insiders was not known or entered into until immediately prior to closing.

The Private Placement remains subject to final acceptance by the TSXV.  The Debentures and Warrants (and the Shares which may be issuable pursuant to the conversion and exercise thereof) are subject to a four month hold period ending August 11, 2014.

All monetary amounts referred to in this press release are to Canadian dollars.

About Longreach

Longreach is an independent oil and gas company focused on its significant land position in Morocco.  The Company has a 50% operated interest in the Sidi Moktar license area covering 2,683 square kilometres and is working closely with ONHYM as a committed long-term partner to unlock the hydrocarbon potential of the region.  Morocco offers a politically stable environment to work within and has extremely favourable fiscal terms to energy producers.  Longreach is a public company listed on the TSX Venture Exchange under the symbol "LOI".

Additional information about the Company can be found at www.longreachoilandgas.com and under the Company's SEDAR profile at www.sedar.com.

About West Face Capital Inc.

West Face Capital Inc. is one of Canada's leading alternative investment managers combining control-through-distressed, high-yield, negotiated finance, proactive equity, and private equity activities.  West Face's capabilities are underpinned by a seasoned multi-disciplinary investment team, proprietary origination channels, deep sector expertise, and the ability to address investment targets in domestic and international markets.

Special Note Regarding Forward Looking Statements

This press release contains forward-looking statements.  These statements relate to future events or the Company's future performance.  All statements other than statements of historical fact are forward-looking statements.  Forward-looking statements are often, but not always, identified by the use of words such as "may", "will", "should", "expect", "plan", "anticipate", "believe", "estimate", "predict", "project", "potential", "targeting", "intend", "could", "might", "continue" or the negative of these terms or other similar terms.  Forward-looking statements in this press release include, but are not limited to, statements regarding the potential future equity offering by the Company for the purpose of repaying or refinancing the Debentures, as well as the continued development of the Company's projects in Morocco.  Forward-looking statements are only predictions.  Forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause actual results or events to differ materially from those anticipated in such forward-looking statements.  Some of the risks and other factors which could cause results to differ materially from those expressed in the forward-looking statements contained in this press release include, but are not limited to: general economic conditions in Canada, the Kingdom of Morocco and globally; industry conditions, including fluctuations in the price of oil and gas, governmental regulation of the oil and gas industry, including environmental regulation; fluctuation in foreign exchange or interest rates; risks inherent in oil and gas operations; political risk, including geological, technical, drilling and processing problems; unanticipated operating events which could cause commencement of drilling and production to be delayed; the need to obtain consents and approvals from industry partners, regulatory authorities and other third-parties; stock market volatility and market valuations; competition for, among other things, capital, acquisitions of reserves, undeveloped land and skilled personnel; incorrect assessments of the value of acquisitions or resource estimates; any future inability to obtain additional funding, when required, on acceptable terms or at all; credit risk; changes in legislation; any unanticipated disputes or deficiencies related to title matters; dependence on management and key personnel; and risks associated with operating in and being part of a joint venture.  Although the forward-looking statements contained in this press release are based upon assumptions which management of the Company believes to be reasonable, the Company cannot assure that actual results will be consistent with its expectations and assumptions.  Material factors and assumptions which management of the Company has considered in connection with making the forward-looking statements in this press release include that the Company will be able to raise adequate proceeds and refinance or repay the Debentures on terms acceptable to the Company.  Undue reliance should not be placed on the forward-looking statements contained in this news release as there can be no assurance that the plans, intentions or expectations upon which they are based will occur.  These statements speak only as of the date of this press release, and the Company does not undertake any obligation to publicly update or revise any forward-looking statements except as expressly required by applicable securities laws.

Neither the TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.

SOURCE Longreach Oil and Gas Limited