San Diego, July 25, 2016 – Royale Energy, Inc. (OTCQB: ROYL) Royale and privately held Matrix Oil Corporation jointly announced today that they have entered into a Letter of Intent to merge in a combined stock and assumption of debt transaction. The $41.5 million transaction remains subject to completion of due diligence reviews and customary definitive documentation and the approval of the shareholders of both companies. The companies seek to complete the merger in the fourth quarter of 2016.

With oil and gas properties in the Sacramento, San Joaquin and Los Angeles Basins of California and the Permian Basin of Texas, Matrix brings to Royale an experienced technical and operations team along with a producing property set with substantial development upside. As of March 31, 2016, Matrix had total proved reserves of 12.2 million barrels of oil equivalent with a PV10 value of $102.8 million based on SEC Pricing. The Matrix reserve report prepared by Netherland, Sewell & Associates, Inc. includes over 80 proven undeveloped drilling locations mostly in the Los Angeles Basin. At closing, the combined company should have estimated daily production of approximately 650 barrels of oil equivalents per day. The company will retain the Royale Energy name with Matrix becoming a wholly owned subsidiary of Royale. Matrix will continue to operate from its current Santa Barbara, CA office.

“This combination of two great California companies is a persuasive value proposition for each company’s shareholders. The combination of Royale’s great shareholder base and 30-year operating history, with Matrix’s strong management team, technical expertise, current production and solid reserve base provides our company with the catalyst we needed for strong continuous growth,” said Harry Hosmer, founder and Chairman of Royale. “This transaction will strengthen us financially and strategically position us for further acquisitions. In addition, this transaction places us squarely on the path for qualification and timely application to re-list on NASDAQ.”

“Matrix is looking forward to closing this transaction and becoming an integral part of Royale’s future. Being a part of a publicly traded company brings us the long term capital optionality required to unlock the exceptional reserve base Matrix has built over the last 17 years. With our recent acquisition of Sansinena Field, Matrix now controls over 40 million barrels of 3P reserves along the Whittier Fault in eastern Los Angeles County,” said Johnny Jordan, President of Matrix. “Our founders and major stakeholders are all committed to closing this transaction and being a part of a unified California oil and gas focused growth story.”

In the proposed merger, Royale will issue one share of common stock for each share of common stock outstanding at the time of the execution of definitive documents, assume all of Matrix’s $12.5 million of secured term debt, and issue 2,000,000 shares of convertible preferred stock with a par redemption value of $10.00 per share. Assuming a $0.50 price per common share, the transaction is valued at approximately $40 million. The final terms of the new convertible shares will be available upon the execution of the forthcoming definitive documents.

Matrix’s strong technically focused management team has over 100 years of combined industry experience amongst its three founders, each of which will be active in the combined company. Upon consummation of the transaction, Jonathan Gregory will continue to serve as Chief Executive Officer of Royale and Johnny Jordan will become President and Chief Operating Officer. Don Hosmer will continue to head Business Development for Royale’s Direct Working Interest line of business and Stephen Hosmer will continue to serve as Royale’s Chief Financial Officer.

The board of the combined company will be comprised of four members from the current Royale board and four members to be appointed by Matrix. Two of the Matrix appointees will be Johnny Jordan and Jonathan Clarkson. Mr. Clarkson brings over 40 years of oil and gas industry expertise to the Royale board. He will serve alongside Harry Hosmer as non-executive Co-Chairman until Mr. Hosmer’s retirement. The reconstituted board will meet all of the independent director requirements of NASDAQ.

Legal counsel to Royale in the transaction is Strasburger & Price, LLP, Austin, Texas. Legal counsel to Matrix in the transaction is Porter & Hedges, LLP, Houston, Texas.

Northland Capital Markets has been retained to serve as financial advisor to Royale.

Royale intends to schedule an investor conference call once definitive documents have been executed to discuss these developments. Information regarding the call will be disclosed when available.


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