Venture Exchange) is pleased to provide an update on the operations , financial position and business plans
PRESS RELEASE
BAYSHORE PETROLEUM CORP PROVIDES OPERATIONS UPDATE AND ANNOUNCES REINSTATEMENT
TO TRADE
/NOT FOR DISTRIBUTION TO U.S. NEWSWIRE SERVICES OR FOR DISSEMINATION IN THE UNITED
STATES/
CALGARY, December 31, 2018 – Bayshore Petroleum Corp. (“Bayshore” or the “Company”) (BSH/TSX
Venture Exchange) is pleased to provide an update on the operations , financial position and business plans
of the Company and the reinstatement of trading of the Company’s shares.
Company Overview
Bayshore is a Calgary, Canada based o il and gas company focused on exploiting h eavy oil/bitumen
resources in Western Canada.
Financial constraints over the past number of years have restricted the ability of the Company to materially
advance operational activities and implement the Company’s business plan. Following the termination of
all agreements and letters of intent relating to heavy oil upgrade technology and all aspects of a pilot heavy
oil upgrade project by the end of 2016, the Company reduced staff and personnel costs considerably,
substantially decreased general and administrative expenses, and successfully prevented the Company
from becoming insolvent. Funding of the Company’s activities during 2017 and 2018 was provided by the
board and executive management personnel through short-term loans and management services provided
at no cost.
During th is period of financial distress, while seeking a longer -term financing solution, executive
management maintained relationships with the primary inventors of advanced oil upgrading technology
and developed relationships with private individuals and corporatio ns interested in funding a partial oil
upgrade project (“Pilot Project”). During July 2018, the Company secured access to sufficient equity
financing (discussed below) to allow the Company to hire human capital to advance the testing and
validation of tec hnology and plan a test of the heavy oil upgrade process in the field. T he Company ’s
immediate plans involve continued collaborative efforts with stakeholders associated with the full scope of
the Pilot Project and discussions with potential investors to assist in financing the Company’s initiatives.
Private Placement
On June 29, 2018 the Company announced its intention to complete a non -brokered private placement of
securities consisting of 50 million common shares (“Shares”) at $0.015 per share for gross proceeds of
$750,000, less any commissions or finders’ fees paid (the “Private Placement”). In July 2018, the C ompany
initiated the Private Placement with Morag Investments Ltd., a company owned and controlled by Mr. Ivan
Chan, Director and Chairman of the Board of Directors of Bayshore . The Private Placement was approved
by shareholders of the Company at the August 7, 2018 Annual General Meeting (“AGM”). At the AGM, the
Company sought and obtained disinterested shareholder/minority approval for the Private Placement.
The Company is pleased to announce that it has received approval of the P rivate Placement by the TSX
Venture Exchange (“Exchange”) on December 28, 2018 and has closed the Private Placement . Proceeds of
the Private Placement have been received and provide Bayshore with enough working capital to commence
the initial stages of the Pilot Project.
Trading of Bayshore Shares on the TSX Venture Exchange
On May 4, 2018 trading of Bayshore common shares was suspended by the Exchange due to a Cease Trade
Order for failure to file financial statements . Since that time, the Company has endeavored to resolve
issues and deficiencies identified as a result of a continued listing review conducted by the Exchange. The
Company has now resolved all issues raised by the Exchange and shares will be reinstated for trading at the
open on Thursday, January 3, 2019.
Company Financial Statements
The Company has filed its 2018 third quarter Financial Statements and Management’s Discussion and
Analysis which is now available at www.sedar.com.
Board and Management Changes
In the third quarter of 2018, Mr. Ivan Chan was appointed Chairman of Bayshore and Mr. Peter Ho resigned
as Chairman . Peter Ho is currently a Director and CEO of Bayshore. During 2018, the Company
strengthened the composition of the board with the addition of two non -executive and independent
directors, Madam Ellen Yu and Mr. Alex Falconer, both of whom are members of the audit committee.
In addition, during October 2018, M r. Lance Mierendorf, CPA, was appointed as the Chief Financial Officer,
replacing Mr. Peter Ho who previously held the position.
Current Operations
Bayshore's current activities have largely been limited to dealing with administrative matters . Management
has also been focused on a combination of securing funding to advance the Company’s business plan,
validating oil upgrade technology through in-house expertise, business development and collaborating with
industry partners to implement a Pilot Project.
Oil & Gas Assets
The Company continues to hold two non -operated oil and gas properties situated in Western Canada . The
properties have negative cash flow and, as a result, the properties have been fully impaired for accounting
purposes since 2015. Bayshore plans to divest these assets when appropriate.
Heavy Oil Upgrade Project
Over the past number of years Bayshore has been working with several scientists and specialists who are
developing technology which will be integral to the process of upgrading. Bayshore intends to secure a
license for the technology from the inventor s and to formalize agreements with several heavy oil/bitumen
producing companies to conduct a Pilot Project in Alberta and Saskatchewan. At present, Bayshore is in
negotiations with several Alberta heavy oil/bitumen producing companies who have expressed an intention
to supply heavy oil under a long- term contract and who are willing to joint venture with Bayshore on the
future exploitation of resources. Implementation of the Pilot Projec t is planned for as early as Q2 2019 but
is dependent on Bayshore securing additional financing in an amount that has yet to be finalized. The Pilot
Project is expected to include the acquisition of a technology license, the construction of a field partial
upgrading facility with a capacity of 1,000 barrels per day, the establishment of a laboratory facility in
Calgary, and the securing of one or more sources of oil supply.
The Pilot Project will test the commercial viability of a process that combines and mixes a certain liquid
catalyst with heavy oil in a custom designed reactor facility to make a higher quality oil which will be more
suitable for delivery through the Canadian oil pipeline system. Bayshore is facilitating discussions with third
parties who would be involved in the various aspects of the Pilot Project including governmental agencies,
heavy oil/bitumen producing companies, technology specialists, reactor facility construction companies,
and owners of oil pipelines. Discussions and negotiatio ns concerning the relationships between
stakeholders, ownership of assets and obligations between parties associated with the Pilot Project are
ongoing and have yet to be established. As such, the Company currently does not own any aspect of the
Pilot Project nor does it have agreements with suppliers of heavy oil/bitumen or purchasers of upgraded oil
or the owners of the technology required to operate the Pilot Project.
The primary technology to be utilized in the Pilot Project is termed by the Company as Cold Catalytic Cracking
(“CCC”) technology. Bayshore believes there are two applications in the industry for the CCC upgrading process:
Partial Upgrading ( heavy oil/bitumen to s ynthetic crude oil/diluted crude oil) and full upgrading ( heavy
oil/bitumen to raw diesel). The Company does not own, or have a license to, the CCC technology but is
collaborating with the inventors to incorporate the CCC technology into the Pilot Project to assess if the
upgrading process is commercially viable.
The current price differential between heavy oil and light oil provides an opportunity for Bayshore to
exploit the vast amount of discovered resources in Alberta and Saskatchewan using new partial or full
upgrading technology. Bayshore plans to secure ac cess to heavy oil assets located in Western Canada by
acquiring oil producing assets , partnering with industry oil producers and using a process to upgrade heavy
oil in the field. Upgrading the quality of oil at surface and selling the resulting oil products to the existing
pipeline infrastructure provides an opportunity for the Company to accrue significant economic benefits.
Bayshore’s long -term plan is to develop bitumen extraction in -situ, building upon the partial upgrade
technology. This will involve the injection of the partial upgrade catalyst into the reservoir which, together
with minimum heating, will lower the viscosity of the bitumen and facilitate bringing the product to the
surface. Bayshore plans to work with r esearch institutes in Alberta and technology providers to implement
the in-situ recovery of bitumen. Advancement of this initiative will only be made following the successful
implementation of the Pilot Project.
Following a successful Pilot Project, the mid to long term business dev elopment plan involves exploiting
large oil sand s assets, acquiring existing producing heavy oil properties in Alberta and Saskatchewan,
building a full commercial upgrading plant that can convert the heavy oil/bitumen directly into fuel
products, and impl ementing the in -situ bitumen recovery. The success of the se operations is expected to
turn Bayshore into a fully integrated oil and gas producer with the capability to produce bitumen effectively
and economically by converting the heavy oil/bitumen into a high value product fuel.
The total amount of funding required to complete all aspects of the Pilot Project will depend on the results
obtained in the initial activities. The Pilot Project (partial upgrading) is expected to cost between $5 million
and $10 million and include the license fee, equipment purchase, construction cost, first six months
working capital and inventories. Bayshore intends to finance either through a combination of equity
issuance, debt and joint venture arrangements. At the same time, Bayshore will seek government and other
institution subsidies and grants to reduce the capital burden as the technology and process are innovative.
At present, there are incentives programs from Alberta, the Canadian Federal government and the private
sectors that could help to subsid ize the pilot tests. It is uncertain , however, whether the Company will be
able to raise any additional funding to complete the Pilot Project.
Contracts/Agreements
The Company does not currently have any con tracts, agreements or formal arrangements in respect to the
use of technology or the various aspects of the Pilot Project. Bayshore is in ongoing discussions with
various stakeholders who would be involved in the Pilot Project and is coordinating the planning, consulting,
logistics, manufacturing, and sourcing of activities which are expected to result in certain contracts and
agreements being executed at the appropriate time. Advancement of these initiatives is expected to
significantly accelerate following resumption of trading of the Company’s shares and Exchange approval of
the Private Placement discussed above.
Key Historical Operations
In late January 2013, Bayshore signed a long -term technology transfer license with Chemical Foreign
Economic Cooperation Centre (CFECC) to use the proprietary catalyst CCC technology in heavy oil upgrading
in Canada. No value was assigned to this license agreement in 2013 . During 2016, due to lack of financing
available to deploy the CCC technology, the long -term technology transfer license with CFECC was
terminated.
In September 2013 Bayshore signed a management contract with TianAn Canada, the investor group that is
committed to build ing a heavy oil to diesel pilot upgrader in Saskatchewan . No value was assigne d to this
management contract in 2013. The management contract was terminated in 2016.
In April 2014, Bayshore signed a Letter of Intent (“LOI”) with EPC Consulting group of Dubai (“EPCD”) to
build a 1,000 b/d CCC plant to process heavy residuum oil (waste oil) from an Iraq refinery, into diesel.
EPCD and Bayshore agreed to extend the definitive agreement in order to allow for delays in testing the
residuum and delays in final contracting. No value was assigned to this LOI in 2014. A formal agreement
was never executed and therefore the LOI was terminated in early 2015.
In July 2014, Bayshore entered into an exclusive license agreement with a private Canadian company,
International Ultrasonics Technologies Ltd. ( “IUT”), to acquire a Master license in Canada to desulphurize
hydrocarbon using an Ultrasonic Oxidation process. A value of $80,000 was capitalized in 2014 and a
further $385,000 was capitalized in 2015 for a capitalized total amount of $465,000. IUT terminated the
agreement effective December 31, 2016 as Bayshore failed to comply with the payment terms. The
Company expensed the accumulated payments of $465,000 in 2016.
On September 10, 2015, Bayshore announced a Memorandum of Understanding (“MOU”) with E-T Energy
Ltd (“ET”) to jointly develop ET’s Poplar Creek (Fort McMurray) Athabasca oilsands property and produce
diesel on it using each party’s technologies. On December 9, 2015, Bayshore and ET announced the
replacement of the MOU with a Binding Letter of Intent (“BLOI”) containing the announcement of financing
intentions, a share exchange plan for ET shares, and actual ET shares tendered to the deal. No value was
assigned to this BLOI in 2015. On December 8, 2015, Bayshore acknowledged the termination of the BLOI.
In early 2015, Bayshore and its management started a development program with partners to partially
upgrade Alberta bitumen at surface. This development work was conducted by Bayshore technical experts
with assistance from the National Research Council of Canada (“NRCC”). Bayshore’s collaboration with the
NRCC ceased in 2016.
Therefore, at the end of 2016, Bayshore did not have any active and executed contracts, agreements, LOI s
or BLOIs relating to a pilot upgrade project, oil upgrade technology or the CCC technology.
Risk Factors
There are risks in investing in Bayshore which include, but are not limited to:
• the ability of Bayshore to secure sufficient financing to advance its business plans;
• the results of the Pilot Project could vary significantly from expectations;
• the price differential between heavy oil and the upgraded oil could shrink to a point where the
upgrading process would not be profitable;
• the Company may be unable to reach agreements with stakeholders including the own ers of the
oil upgrade technology or the CCC technology;
• actual capital and operating cost estimate s may be materially different from Bayshore’s forecasts
and expectations; and
• increasing competition spurred by recent government initiatives encouraging c ompanies to
upgrade oil in Canada prior to export.
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For further information, please contact:
Peter Ho, Chief Executive Officer and Director [email protected]
+1 (403) 630 4355
Lance Mierendorf, Chief Financial Officer [email protected]
+1 (403) 680 8773
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This news release does not constitute an offer to sell or a solicitation of an offer to buy any of the securities
of the Company in the United States. The Company's securities have not been and will not be registered
under the United States Securities Act of 1933, as amended (the "U.S. Securities Act"), or any state
securities laws and may not be offered or sold within the United States or to U.S. Persons unless registered
under the U.S. Securities Act and applicable state securities laws or an exemption fr om such registration is
available.
Cautionary Statements
Statements in this press release may contain forward-looking information including expectations of future
production, operating costs, commodity prices, administrative costs, commodity price risk management
activity, acquisitions and dispositions, capital spending, access to credit facilities, income taxes, regulatory
changes, and other components of cash flow and earnings. The reader is cautioned that assumptions used
in the preparation of such i nformation may prove to be incorrect. Events or circumstances may cause
actual results to differ materially from those predicted, a result of numerous known and unknown risks,
uncertainties, and other factors, many of which are beyond the control of the C ompany. These risks
include, but are not limited to, the risks associated with the mining industry, commodity prices and
exchange rate changes. Industry related risks could include, but are not limited to, operational risks in
exploration, development and production, delays or changes in plans, risks associated to the uncertainty of
reserve estimates, health and safety risks and the uncertainty of estimates and projections of production,
costs and expenses. The reader is cautioned not to place undue reliance on this forward -looking
information.
NEITHER THE TSX VENTURE EXCHANGE NOR ITS REGULATION SERVICES PROVIDER (AS THAT TERM IS
DEFINED IN THE POLICIES OF THE TSX VENTURE EXCHANGE) ACCEPTS RESPONSIBILITY FOR THE ADEQUACY
OR ACCURACY OF THIS NEWS RELEASE.
Bayshore Head Office:
PHONE +1 403 265 8820
FAX +1 403 290 6565
340-600 Crowfoot Crescent NW
Calgary, Alberta, T3G 0B4