Announcements

Hong Kong (August 15, 2018) and Calgary, Alberta (August 15, 2018) - The Board of Directors (the “Board”) of Sunshine Oilsands Ltd. (the “Corporation” or “Sunshine”) (HKEX: 2012) wishes to supplement the following information:-

References were made to the announcements dated August 19, 2013, September 26, 2013, September 27, 2013, October 21, 2013 and July 27, 2018 (collectively, the “Announcements”) in relation to, among others, the joint operating agreement and other supporting agreements (collectively, the “Agreements”) entered into between the Corporation and Renergy Petroleum (Canada) Co., Ltd. (“Renergy”) with respect to the Corporation’s Muskwa and Godin area oil sands leases (“Leases”) and the proposed amendments to the terms of the Agreements (the “Proposed Amendment”).

Unless defined otherwise, terms used herein shall have the same meanings as those defined in the Announcements.

The Board wishes to supplement that, as the company affiliated with Kwok Ping Sun (the Executive Chairman and a Substantial Shareholder, who was interested in approximately 27.94% of the Corporation as at the date hereof) and Nobao Energy Holding (China) Company Limited (“Nobao”) (a company under the control of Mr. Sun) has conditionally acquired Changjiang’s interest in Renergy, the Proposed Amendment is one-off and the Corporation will not be involved in provision of goods or services or financial assistance under the new joint venture arrangement, the Proposed Amendment should be re-classified as a connected transaction at the moment.
As one of the applicable percentage ratios calculated pursuant to Rule 14.07 of the Listing Rules exceeds 5%, the Proposed Amendment is subject to the announcement requirements, annual review and independent Shareholders’ approval requirements under Chapter 14A of the Listing Rules.

In future, should the new joint venture arrangement involve Sunshine’s provision of goods or services or financial assistance on a continuing or recurring basis and extend over a period of time, the Corporation will issue further announcements for re-classification the transactions contemplated thereunder as continuing connected transactions. The Corporation further assures that it will fully comply with the requirements under the Listing Rules if the applicable percentage ratios set out in Rule 14.07 in respect of the transactions contemplated under the new joint venture arrangement, in aggregate, within a 12-month period, trigger the reporting, announcements, annual review and/or independent shareholders’ approval requirements under Chapter 14A of the Listing Rules. Further independent shareholders’ approval will be sought to this end, if applicable and necessary.

Reasons for and Benefits of the Proposed Amendment Terms of the Agreements

The JOA was first signed in October 2013. Application regarding the construction and operation of a single well thermal pilot project at the Muskwa area was submitted in July 2014 and approved on January 26, 2015. Nevertheless, as at the date hereof, there is no production from Muskwa wells and there are no active planning or development activities occurring due to insufficient spending on enhanced recovery technology programs. The Proposed Amendment provide a reasonable incentive for Renergy to expend funds to establish economic oil production that is subject to lower oil production royalties. Renergy will be the Operator and will be the one to make significant capital spending for the next 5 years with the aim to turn Muskwa and Godin projects into an actively producing project for Sunshine with an initial target of 500 barrels per day production.

It is believed that Muskwa and Godin project is a commercially attractive and viable project as it is relatively close to delivery locations, will be subject to lower oil production royalties (upon approval of an enhanced recovery scheme using Nobao Technologies) and the oil produced can be marketed without adding high cost diluents.

Moreover, the proposed amendment terms contained proper terms for distributions (in the Working Interest clauses), penalty (if Renergy cannot meet the production level of 500 barrels per day in any 20 consecutive days period before October 20, 2023, Renergy’s 60% Working Interest will be forfeited) and termination clauses. Save as the Proposed Amendment, all of the terms of the original set of JOA and its supporting agreements, subject to conforming edits resulting from the proposed amendment, (which were executed between Sunshine and Renergy which at that time was an independent external party) will be adopted.

Besides, because of the relationship between the Affiliate and Nobao, Nobao’s technologies will be allowed to be applied in Muskwa and Godin areas without any need to compensate Nobao. The technologies are expected to enhance oil mobility for the project at a low cost.

Currently, Sunshine cannot invest existing cash resources into Muskwa since it is bound by the covenants of the Senior Notes which limit capital spending into projects other than the West Ells project until West Ells production is at 10,000 barrels per day. The Proposed Amendment provide a golden opportunity to Sunshine to develop and expand its current business without investing additional funds or resources.

In view of all the above, the Directors (including the independent non-executive Directors) considered that the Proposed Amendment are (a) on commercial terms; (b) fair and reasonable and (c) in the interest of the Corporation and its Shareholders as a whole.

Information on Renergy

Renergy is the joint venture formed under the JOA involving the Corporation’s Muskwa and Godin area oilsands leases. Pursuant to the JOA, Renergy will operate the assets as the Operator.

Hong Kong Listing Rules Implications

As one of the applicable percentage ratios (as defined under Rule 14.07 of the Hong Kong Listing Rules) exceeds 5%, the Proposed Amendment is subject to the announcement requirements, annual review and independent Shareholders’ approval requirements under Chapter 14A of the Listing Rules.

Meanwhile, should the new joint venture arrangement involve Sunshine’s provision of goods or services or financial assistance on a continuing or recurring basis and extend over a period of time in future, the Corporation will issue further announcements for re-classification the transactions contemplated thereunder as continuing connected transactions. In addition, if the applicable percentage ratios set out in Rule 14.07 in respect of the transactions contemplated under the new joint venture arrangement, in aggregate, within a 12-month period, trigger the reporting, announcements, annual review and/or independent shareholders’ approval requirements under Chapter 14A of the Listing Rules, the Corporation assures that it will fully comply with the requirements under the Listing Rules. Separate independent shareholders’ approval will be sought to this end, if applicable and necessarily.

The Board wishes to emphasize that the Proposed Amendment may or may not proceed. In the event that any formal agreements are entered into and the new ongoing joint venture arrangement may constitute a notifiable transaction under the Listing Rules, the Corporation will make further announcement(s) as and when appropriate.

Shareholders and potential investors are required to exercise caution when dealing in the Shares of the Corporation.

ABOUT SUNSHINE OILSANDS LTD.

The Corporation is a Calgary based public corporation listed on the Hong Kong Stock Exchange since March 1, 2012. The Corporation is focused on the development of its significant holdings of oil sands leases in the Athabasca oil sands region. The Corporation owns interests in approximately one million acres of oil sands and petroleum and natural gas leases in the Athabasca region. The Corporation is currently focused on executing milestone undertakings in the West Ells project area. West Ells has an initial production target of 5,000 barrels per day.

For further enquiries, please contact:

Mr. Kwok Ping Sun
Executive Chairman
Tel: (852) 3188 9298
Email: [email protected]

FORWARD LOOKING INFORMATION

This announcement contains forward-looking information relating to, among other things, the plans and expectations of the Corporation. Such forward-looking information is subject to various risks, uncertainties and other factors. All statements other than statements and information of historical fact are forward-looking statements. The use of words such as “estimate”, “forecast”, “expect”, “project”, “plan”, “target”, “vision”, “goal”, “outlook”, “may”, “will”, “should”, “believe”, “intend”, “anticipate”, “potential”, and similar expressions are intended to identify forward-looking statements. Forward-looking statements are based on the Corporation’s experience, current beliefs, assumptions, information and perception of historical trends available to the Corporation, and are subject to a variety of risks and uncertainties including, but not limited to those associated with resource definition and expected reserves and contingent and prospective resources estimates, unanticipated costs and expenses, regulatory approval, fluctuating oil and gas prices, expected future production, the ability to access sufficient capital to finance future development and credit risks, changes in Alberta’s regulatory framework, including changes to regulatory approval process and land-use designations, royalty, tax, environmental, greenhouse gas, carbon and other laws or regulations and the impact thereof and the costs associated with compliance. Although the Corporation believes that the expectations represented by such forward-looking statements are reasonable, there can be no assurance that such expectations will prove to be correct. Readers are cautioned that the assumptions and factors discussed in this announcement are not exhaustive and readers are not to place undue reliance on forward-looking statements as the Corporation’s actual results may differ materially from those expressed or implied. The Corporation disclaims any intention or obligation to update or revise any forward-looking statements as a result of new information, future events or otherwise, subsequent to the date of this announcement, except as required under applicable securities legislation. The forward-looking statements speak only as of the date of this announcement and are expressly qualified by these cautionary statements. Readers are cautioned that the foregoing lists are not exhaustive and are made as at the date hereof. For a full discussion of the Corporation’s material risk factors, see the Corporation’s annual information form for the year ended December 31, 2017 and risk factors described in other documents we file from time to time with securities regulatory authorities, all of which are available on the Hong Kong Stock Exchange at www.hkexnews.hk, on the SEDAR website at www.sedar.com or on the Corporation’s website at www.sunshineoilsands.com