PETROSHARE CORP. (OTCMKTS:PRHR) Files An 8-K Entry into a Material Definitive Agreement

PETROSHARE CORP. (OTCMKTS:PRHR) Files An 8-K Entry into a Material Definitive Agreement
Item 1.01 Entry into a Material Definitive Agreement.

On February1, 2018, PetroShare Corp. (the “Company”) entered into a Secured Term Credit Agreement (“Credit Agreement”) with Providence Wattenberg, LP, a Texas limited partnership (“Providence”), and 5NR Wattenberg, LLC, a Texas limited liability company (“5NR,” and together with Providence, the “Lenders”). The Lenders loaned the Company $25 million (the “Loan”) under the Credit Agreement, which Loan is comprised of $5 million previously advanced to a Letter Agreement dated December21, 2017, and $20 million funded at closing of the Credit Agreement (“Second Closing”). Providence is an affiliate of Providence Energy Operators, LLC (“PEO”), the beneficial owner of approximately 13% of the Company’s outstanding common stock, by virtue of common management personnel.

Interest on the outstanding principal balance of the Loan accrues at the rate of 14% per year, plus the greater of three-month LIBOR and 1%, but in no event to exceed 17%. Interest payments are due monthly beginning March1, 2018. Repayment of the Loan is secured by a lien on all of the Company’s assets, which lien is equal in priority to the lien securing the remaining indebtedness owed to Providence Energy Partners III, LP (“PEP III”). All principal and accrued interest under the Credit Agreement is due February1, 2020 (“Maturity Date”).

At any time, each Lender may convert 20% of the outstanding principal such Lender loaned into common stock of the Company at a price of $1.15 per share and the remaining principal at a price of $1.55 per share. The Company also granted to the Lenders:

· not to incur any additional debt without the Lenders’ consent; and

· not to engage in certain transactions, such as sale of all or substantially all of its assets, mergers, acquisitions, or the engagement or termination of key employees, each without the Lenders’ prior consent.

The Company used a portion of the $20 million proceeds from the Second Closing to pay certain fees and expenses arising under the Credit Agreement and satisfy a portion of its outstanding debt. The Company repaid $5.5 million in full satisfaction of the Company’s line of credit with PEO. The Company made a principal payment of $1.5 million plus $500,000 in accrued interest under the Company’s line of credit with PEP III. The remaining balance of the PEP III loan, in the amount of $2.1 million, plus accrued interest, is due June30, 2018. The Company also paid a commitment fee to the Lenders of $1.25 million at the Second Closing and agreed to pay to the Lenders an underwriting fee of $1.25 million before February1, 2019.

The remainder of the proceeds from the Loan will be used to develop the Company’s properties, including capital expenses, and general and administrative expenses as set forth in a budget approved by the Lenders.

The Credit Agreement is not intended to provide any other factual information about the Company. The representations, warranties, and covenants contained in the Credit Agreement were made only for purposes of the Credit Agreement, including the allocation of risk between the parties, and as of specific dates, were solely for the benefit of the parties to the Credit Agreement, and may be subject to limitations agreed upon by the contracting parties, including being qualified by confidential disclosures exchanged between the parties in connection with the execution of the Credit Agreement.

A copy of the Credit Agreement is attached to this report as Exhibit10.1. The description of the Credit Agreement in this report is qualified in its entirety by reference to Exhibit10.1.

Item 1.02 Termination of a Material Definitive Agreement

The information under Item 1.01 above is incorporated into this Item 1.02 by reference.

Item 2.03 Creation of a Direct Financial Obligation or an Obligation Under an Off-Balance Sheet Arrangement of a Registrant

The information under Item 1.01 above is incorporated into this Item 2.03 by reference.

Item 3.02 Unregistered Sales of Equity Securities

The information under Item 1.01 above is incorporated into this Item 3.02 by reference. The Company relied on the exemption from registration provided by Section4(a)(2)of the Securities Act of 1933, as amended, in connection with issuance of the securities.

Item 7.01. Regulation FD Disclosure.

On February2, 2018, the Company issued a press release announcing the execution of the Credit Agreement. A copy of the press release is attached to this report as Exhibit99.1.

The information furnished under this Item 7.01, including the exhibit, shall not be deemed “filed” for purposes of Section18 of the Securities Exchange Act of 1934, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, except as shall be expressly set forth by reference to such filing.

Item 9.01 Financial Statements and Exhibits

The following exhibits are filed or furnished with this report:

Exhibit

Number

DescriptionofExhibit

10.1

Secured Term Credit Agreement among the Company, Providence Wattenberg, LP and 5NR Wattenberg, LLC, dated February1, 2018

10.2

Form of Deed of Trust, Mortgage, Assignment of Production, Security Agreement and Financing Statement

10.3

First Amendment to Amended and Restated Participation Agreement, dated February1, 2018

10.4

Registration Rights Agreement between the Company, Providence Wattenberg, LP, 5NR Wattenberg, LLC and Providence Energy Operators, LLC dated February1, 2018

99.1

Press release dated February2, 2018


PetroShare Corp. Exhibit
EX-10.1 2 a18-5456_1ex10d1.htm EX-10.1 Exhibit 10.1   Execution Version   SECURED TERM CREDIT AGREEMENT   DATED AS OF   FEBRUARY 1,…
To view the full exhibit click here

About PETROSHARE CORP. (OTCMKTS:PRHR)

PetroShare Corp. is an independent oil and natural gas company. The Company focuses on acquisition, exploration and development of crude oil and natural gas prospects. Its properties are located in Colorado. It has interest in over two gross wells and approximately 3,100 gross acres of oil and gas properties. It has interests in over two crude oil and natural gas prospects, including Buck Peak prospect, which is located in Moffatt County, Colorado, and Todd Creek Farms prospect, which is located in Adams County, Colorado. Its working interest position in the Buck Peak prospect is concentrated in one 672-acre section, including over two drilled wells. It focuses on acquiring acreage and development of the Todd Creek Farms prospect. Its focus in both prospects is the Niobrara formation, which is a calcareous shale rock formation varying from 200 to 1,500 feet in thickness and extending from Canada to New Mexico with the oil and natural gas concentration located in Colorado and Wyoming.

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