Royale Energy Inc (OTCMKTS:ROYL) Making A Comeback

Royale Energy Inc (OTCMKTS:ROYL) is on the comeback trail after signing an agreement this week to merge with privately held Matrix Oil Corp. The $41.5 million transaction includes oil and gas properties in the Sacramento, San Joaquin and Los Angeles Basins of California and the Permian Basin of Texas, which are some of the best locations in the continental U.S. Royale hopes to have the transaction completed by the end of this year and then more importantly, re-list on NASDAQ.Royale Energy was founded in 1986 with primary operations in the Sacramento and San Joaquin basins in California. Matrix Oil Corp was founded in 1999 and has focused on acquiring properties that have long-term and low-risk production. Currently, the company owns and operates oil-producing properties in the Los Angeles and San Joaquin Basins of California. It also owns natural-gas producing properties in the Sacramento Basin and oil-producing royalty and non-operated properties in the Permian Basin of West Texas. In these focus areas, Matrix has lease and fee ownership in 15 producing fields in approximately 28,000 acres that hold in excess of 200 Matrix-interest wells.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 well-respected 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.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 $41.5 million.Upon consummation of the transaction, Jonathan Gregory will continue to serve as Chief Executive Officer of Royale and Johnny Jordan, President of Matrix, 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, which puts the company one step closer to relisting. Matrix President Johnny Jordan said:

"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. 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."

Currently trading with a market cap of $13 million, ROYL is an exciting story among small caps. We applaud the merger with Matrix. Once the transaction is complete, we then expect the company to apply for and receive its NASDAQ listing. For the latest updates on ROYL, sign up for our free small cap newsletter today!Disclosure: We have no position in ROYL and have not been compensated for this article.