SPK Dissident Shareholder Circular
Sunset Pacific Petroleum Dissident Shareholder Circular Dear Shareholder of Sunset Pacific Petroleum, As concerned dissident shareholders of Sunset Pacific Petroleum (the Company), we have concluded that in the interests of all shareholders a change of directors and management of the Company is required. We the dissident shareholders believe that the Company has significant potential and that the current management has been slow to develop this potential and non- transparent concerning operations. On July 30, 2018, the management of the Company filed on Sedar that they would be holding their annual general meeting on September 27, 2018 a full 15 months following their previous AGM in 2017. Two weeks later, on August 13, 2018, the Company amended its filing, changing the date of the AGM to October 19, 2018 and adding that immediately following the AGM management would hold a Special Shareholder meeting. Neither of these filings were published via any public announcement organizations. Fortunately, one diligent shareholder was on Sedar and ran across this filing. Lack of Transparency The current management has completely removed the Companys website from the internet. This is a serious transparency issue for shareholders. Several directors of the Company have been in place for many years. Albert Raponi, the former CEO, resigned from the management and board some months ago and sold more than 1 million shares of stock. We dont know the reasons this occurred. This is of concern and interest for shareholders. According to insider reports, management members own very little (less than 2%) of the shares of the Company. Dissident shareholders that we have contacted hold some 60% of the shares. This block of ownership gives us collective voting rights in deciding on major policy decisions such as appointment of the CEO and directors, executive compensation, acquisitions of businesses, and management of current assets of the company. Dissident shareholders are deeply concerned that the current management will endeavor to introduce during the scheduled Special Meeting self-serving measures beneficial to the management members but contrary to the interests of more than 98% of the shareholders. In particular, there is concern that the current management may propose a 10/1 roll back of shares, in order to facilitate management members gaining a stronger stake in the Company. Needless to note, such a roll back would considerably reduce the net worth for shareholders of their holdings. The article provided in the link below details the insider ownership of the Company, which is cited as 1.6%. https://simplywall.st/stocks/ca/energy/tsxv-spk/sunset-pacific-petroleum-shares/news/why- sunset-pacific-petroleum-ltds-cvespk-ownership-structure-is-important/ While this is not abnormally low, the article notes that a higher level of insider ownership would usually be linked to management executing higher-return projects. Because current management members have relatively little stake in the outcome of SPK, they have had only a weak incentive to push the Company forward. Indeed, it appears that management members may have had an incentive to hold back or lower SPKs stock price so as to enable acquiring more of the stock. This observation is founded in part on the Companys development document issued in 2016. It outlines managements property agreement with the Tunisian government concerning the Ben Khedechef (A.K.A. Beni Khedache, and formerly known as El Hamra) 3,972 km2 onshore block in Central Tunisia. The agreement and proposal details were buried in a defunct part of their old website and have now disappeared. It appears that management was endeavoring to gain a larger stake in SPK so as to benefit from this and other assets. Allegedly, management hoped to do a $.02 cent private placement in December 2017. However, the private placement could not be made as the stock price remained in the $.04 cent range. Again allegedly, management has been considering a major rollback of the stock and thereby facilitate issuing themselves stock after the rollback. While the Company has other initiatives in play, the Ben Khedechef prospect appears to be of potential great value. In the Management Discussion and Analysis document dated June 30, 2018 a limited outline of the prospect is provided, noting in particular a renegotiated agreement with a farmout partner for a 50 percent working interest in the Tunisia concession. The renegotiated agreement includes a letter of credit for $5 million US provided by the farmee. The Management Discussion document states: Sunset will provide further disclosure of this transaction, including the name of the farmee, when all conditions by all parties have been met. This agreement is subject to regulatory and government approvals. While it is recognized that confidentiality must pertain to formulation of this agreement and the way forward, shareholders have been largely kept in the dark. This may reflect desire on the part of management to hold SPKs stock price down until it can gain a larger stake in the Company. The following Market Advisory by the Quant Research Group (New York) provides insight into the prospects of the Tunisian concession, some of which is highly speculative but founded on information that should have been shared with shareholders. Market Advisory - Coverage initiated: Sunset Pacific Petroleum Ltd. (TSX-V: SPK) - Near-term share price target: C$1/share Shares Issued 73,936,936, Market cap $3,327,000 trading at $0.045 Corporate & Technical Report Based on new understanding of the opportunity (the full potential, as understood by Dr. Gharbi, ex Royal Dutch Shell plc Technical Manager), of which was not previously in the public realm, we have initiated coverage. A technical overview of Sunset Pacific Petroleum's Ben Khedechef (A.K.A. Beni Khedache, and formerly known as El Hamra) 3,972 km2 onshore block in Central Tunisia, working under an updated fault model, reveals the block is in fact now considered among one of the most coveted blocks in Tunisia with a mean reserve potential of >1 Billion Barrels Oil in place (source: page 5 of attached technical overview), and significantly more according to the model, to be proven up with exploration, along the production trends "Triassic Play: In addition to 5 billion BOE Hassi Berkine type TAGI (braided fluvial channels sourcing from SE Algeria). The Beni Khedache block has potential in reservoirs equivalent to the Northern Ghadames "TAGI" which contains 25 billion BOE in several Algerian fields." We know interest is high in Sunset Pacific Petroleum's Ben Khedechef bock as it is immediately proximal Mazariane Energy's ordovician discovery well of 4,300 bopd, 13.4 million standard cubic feet per day gas, which prompted the Carlyle Group to invest $US500 million. Since the awarding of the Ben Khedechef block to Sunset Pacific Petroleum Ltd. the Company has essentially gone dark; no website. bare minimal filings, and minimally nurturing old prospects (letting others do the heavy lifting). There also appears to have been an attempt to scrub the history of the Company's digital presence. Additionally, our research has uncovered previous attempts by inquisitive entities asking about the alleged existence of a technical report by Shell on Sunset Pacific's Ben Khedechef bock, however the Company's answer was to deny there was, and they were 'technically' correct as the report was in fact by "ex"-Shell geologist Dr. Gharbi -- not Shell itself. The report is available: https://quantresearch.net/SPKcorporateANDtechnicalJuly24-2016.pdf Readers are cautioned that NI standards for reports prohibit the reliance on information unless it is filed by the Company in accordance with rules. Shareholders might want to press the Company for comment. There appears reason for investors to at least add TSK-V:SPK to their watch list and consider a long position here. For existing shareholders, in light of the analysis in the technical report, it makes no sense for shares of TSX-V:SPK to be offered out on the ask under 50 cents, and once news of exploration on the claim begins the stock could climb nearer $2/share. The stock could easily trade well over $1/share on speculation in the interim. Further details about Managements operations are provided in an annex to this circular. Of particular concern for dissident shareholders is the vagueness of SPKs assets. For example, how secure is the Ben Khedechef concession and what is the likelihood of being able to reach an operational agreement with both the farmee and Tunisian government. Oil and gas deals are complex and demand adequate financing. Shareholders need confidence that Management is up to the task. Dissident shareholders are highly skeptical. In light of the above discussion and observations, dissident shareholders are recommending a new board of directors and management. Proposed New Board of Directors We have assembled a high-powered team of shareholders to be the prospective new board of directors of Sunset Pacific Petroleum Inc., which we want each of you to vote for. Below you will find brief outlines of their qualifications and experience. We will also offer to include some members of the existing team so as to ensure continuity with ongoing negotiations concerning current projects. We are confident that the new team will greatly strengthen the performance of SPK. Charles A Smith Charles A. Smith has over forty years of experience as an Independent Oil and Gas Operator and Contractor. Mr. Smith has been an Oilfield Owner & Operator and a Senior Oil and Gas Company Executive. He has served in executive positions and directorships for several domestic and international oil and gas companies in his career. Mr. Smith is experienced in all areas of oil and gas production from wellhead to P & L Responsibility. His Project Management experience includes operations enhancement, evaluation of oil and gas reserves and integrated interpretation of studies that involve 3-D Seismic to develop for cost effective drilling programs. Mr. Smith is thoroughly experienced in all areas of exploration and production, production enhancement and well stimulation and design. Dr. David Husband Dr. Husband is a Canadian citizen who has homes both in Ottawa and Washington DC. He has a Doctorate of Economics from the London School of Economics and Political Science in the United Kingdom and a Master of Economics from the University of Western Ontario. His public sector positions include the Bank of Canada, Federal Ministries, the Privy Council Office and the Economic Council of Canada. He held the political position as Director of the Liberal Caucus Research Bureau, reporting to Prime Minister Trudeau and Liberal Caucus Members. As a senior partner of Global Economics Ltd. for more than two decades, a highly respected consultancy firm, Dr. Husband has had extensive senior level development work in Canada and Asia, including project/ program formulation and evaluation and debt management/public finance. His assignments have involved organizing and hosting numerous Ministerial meetings and workshops. In his role with SPK, Dr. Husband will be greatly assisted by his business associate Mika Husband, who holds a CFA and has had extensive investment banking and financial management experience, including as VP of Business Development with Ironstone Resources, VP of Investment Banking with Stifel Nicolaus Canada Ltd., and as a Research Associate with RBC Capital Markets based in Calgary covering the junior oil and gas sector in Canada. Dr. Husband has the expertise, team skills and integrity to help revitalize Sunset Pacific Petroleum Ltd. Michael W. Starkweather Mr. Starkweather brings over 30 years of legal, engineering and MBA experience. He stated his working career as an Administrative Law Judge in the Dept. of Commerce, where he received a commendation from the Commissioner for his work. He then moved on to hold top corporate legal positions at IBM, CTS, and AT&T. Additionally, for half a decade he was on Board of Advisers and an Adjunct Professor at the U. of Utah MBA program, teaching international technology company analysis and strategy. He was also a national speaker at an international business association for over a decade, teaching over 5000 CEOs about money raising and technology management. Mr. Starkweather has also been an international consultant for Thomson Reuters, auditing and redesigning technology management processes of a $2Bil Canadian aerospace company, and a $22Bil Thailand chemical company, among others. Moreover, he has been involved in many large business and legal deals, such as managing a $300M software company acquisition, a $100M Motorola division acquisition, a $40M holding company acquisition. One noted deal involved a patent he negotiated the sale to Apple for over $500M. Mr. Starkweathers education includes a Bachelors of Science degree in Engineering, where he received the prestigious Deans Honors, and a Juris Doctorate in Law from the Univ. Wisconsin. Martin Tutschek Mr. Tutschek has extensive highlevel experience in operations, finance, accounting, compliance and corporate structure and is proficient in all aspects of publicly traded companies. Mr. Tutschek is a Canadian and has a Business degree with a double major in Finance and Marketing with honors from the University of Texas and began his career in junior capital markets. During an 8 year tenure as a licensed stockbroker and analyst at PI Financial, he was focused seeking value for clients within a junior companys financial development and the Companys continuous needs for capital and participated in Private Placements and IPOs. Following the excitement of rapidly growing companies Mr. Tutschek joined Trader.com International in Montreal where he severed as Director of Circulation for North American Operations responsible for the deadline delivery of over 120 weekly publications throughout the continent. After establishing National distribution agreements and synergising the continental logistical operations, he was promoted to Indianapolis, Indiana as Manager, Business Development US operations. His primary role was the analysis, identification and implementation of complimentary business growth opportunities and the creation of the business and marketing plan for Trader.com US operations. Mr. Tutschek has a passion in the formulation and implementation of capital plans and has served as director and officer of junior public companies in this respect. Most recently he was a Director, Chief Financial Officer and Audit Committee member of Forum National Investments Ltd. In this capacity, he oversaw several multi-million dollar revenue business units including, in the travel and hospitality and developments into the Life Settlements industry. He was also deeply involved in operations and responsible for the required financial audits and timely filing of Securities requirements. Mr. Tutschek continues to provide new enterprises with strategic financial and business advice. This may include assistance with the implementation of proper financial systems & controls, reviewing and establishing a sound overall business strategy and direction, debt and capital raising assistance, or fine-tuning existing systems and plans to move a business forward. Annex 1: SPK Oil and Gas Initiatives Company Background: Sunset Pacific Petroleum Ltd. is a natural resource company incorporated in 1981 and since 2005 has been engaged in the exploration, development and production of oil and natural gas. A review of most recent MD&A on SEDAR filings (SEDAR URL here) shows the Company having disclosed its 'Business Description' is as follows The Company is a junior resource exploration company engaged in the acquisition, exploration, and development of natural resource properties (primarily oil and gas). The Companys only sources of revenue are royalties from Bougie Trutch and Trutch East royalty interests and the Company does not operate any producing resource properties at this time. The Companys business is presently focused on the evaluation of various oil and gas properties and concessions in the Middle East (Oman) and in North Africa (Tunisia). The Company intends to explore and develop prospective resource plays, which then provide the economic platform to pursue the deeper more unconventional formations that have significant upside potential. The Company has been awarded the Ben Khedechef concession in Tunisia (previously named El Hamra) subject to certain conditions. (Please see Proposed Transaction).The final details will be reviewed by the Government of Tunisia Etap/DGE and the Companys representatives in Tunisia in the coming weeks. The 'Proposed Transaction' section of the MD&A is as follows: On June 2, 2014 the Company announced that it has signed a memorandum of understanding ("MOU") with IMI and COTIF SICAR (investment arm of the CARTE group) both headquartered in Tunisia. The MOU outlines an equal partnership between the parties in evaluating and acquiring several near term production and high impact exploration projects in the Middle East and North Africa ("MENA") region. The IMI-EAG group, established in 1974 and headquartered in Tunisia has over 60 companies throughout the world including the USA, Canada, the Philippines, Thailand, Maylasia, Papua New Guinea, Algeria, Morocco, Egypt, Chad, Cameroon, Angola, Qatar, Bahrain, Dubai, Abu Dhabi and Saudi Arabia. IMI-EAG is a global leader in technical assistance and has been committed to offering the world-class oil and gas construction services in the fields of mechanics, electricity, civil works, and field development from commissioning to start-up and operations to maintenance. Currently, IMI-EAG has more than 400 core employees and up to 1500 skilled engineering and trades contractors at any given time, adhering to the highest standards of quality, transparency and international qualifications. CARTE (C.A.R.T.E - Compagnie d'Assurances et de Rassurances Tuniso- Europenne ) was founded in 1976 by BNP (now BNP Paribas) and DOGHRI Group and in partnership with FGM and Prservatrice. In 1986, under the leadership of its current CEO , Mr. Hassine Doghri, the DOGHRI Group in partnership with Mutual of Le Mans took control CARTE. Today, with over 35 years of experience, CARTE is a leader in the Tunisian insurance sector. Mr. Doghri has served as the honorary general consul for the Norwegian consulate in Tunis since 1982 Tunisian British Chamber of Commerce since 2010. CARTE holds strategic partnerships with both local and foreign partners, investing in various sectors. On November 3, 2014 the Copmpany announced that it had signed a memorandum of understanding with Hoqool Petroleum International WLL Co., based in Manama, Kingdom of Bahrain. The MOU outlines an equal partnership between the parties in evaluating and acquiring near-term production and high-impact exploration projects in the Middle East and North Africa region. Hoqool Petroleum International is an independent oil and gas exploration and production company, incorporated and headquartered in the Kingdom of Bahrain. The founding management team comprises senior energy executives from the national oil companies of Bahrain and Saudi Arabia, who are experienced and well recognized, both locally and internationally, covering the upstream sector of oil and gas, with more than 175 years of combined experience. The company was established in 2010 and represents a consortium of three Arabian Gulf firms that have long years of experience in the most prolific and richest petroleum system in the world. The core business of Hoqool is the development of energy resources; its activities include exploration and development of oil and gas fields. The Company has now applied for two open exploration permits with the Tunisien Direction Generale de l'Energie. The first open permit was applied for on July 31, 2014, where the company has partnered on an equal basis with two established Tunisian companies, namely IMI and COTIF-SICAR (investment arm of the CARTE group). The second open permit was applied for on Oct. 30, 2014, where the company will partner with Bahrainbased oil company, Hoqool Petroleum International WLL Co. Both open permits meet the company's criteria of near-term production potential, with good seismic quality and previously drilled wells along with nearby proven production. The Company is now waiting for the Tunisian government on final approvals for both permits. On March 23, 2015 the Company announced that it has entered into a non-binding letter of intent (LOI) to acquire a 56.25% participating interest in an existing exploration and production sharing agreement for an onshore block in The Sultanate of Oman (the Oman Block), with the current block holder owning an 18.75% participating interest and the Sultanate of Oman owning the remaining 25% participating interest in the property. (As required under the terms of the exploration and sharing agreement, the Oman government is carried in the exploration phase.) Sunset will be the operator of the Oman Block. Pursuant to the terms of the LOI, Sunset will pay the current block holder US$100,000 within 30 days after signing the LOI. A finders fee may be payable with respect to this transaction. The parties are now working to finalize the necessary formal agreements as soon as practicable. On February 23, 2016, The Company announced that it has signed a conditional agreement to acquire an oil and gas concession in Oman subject to certain conditions being met over the course of the next two months. The Company has paid the vendor a lock-up fee of US$50,000. The parties are conducting final due diligence negotiating and finalizing an operating agreement which they expect to complete by the end of May 2016. As at the date of this report, this agreement has not been finalized. On May 9, 2016, The Company announced that is has been awarded the Ben Khedechef concession in Tunisia (previously named El Hamra). The final details will be reviewed by the Government of Tunisia Etap/DGE and the Companys representatives in Tunisia. On April 26, 2017 the Company announced that it has signed an agreement to farm out a fifty (50%) percent working interest in its interest in a hydro-carbon Concession in Tunisia. The conditions of the Agreement call for Sunset to receive approval from the government of Tunisia for this Agreement. The Agreement also calls for Sunset to receive all government approvals to proceed to a work program on the concession. The farmee will provide A SWIFT coded Letter of Credit for the sum of Five Million United States (USD $5,000,000) Dollars with the term of five years, that must be approved by the government of Tunisias confirming bank. Pursuant to the Agreement, the farmee will pay: (a) to Sunset the sum of Two Million United States (USD $2,000,000) Dollars in sunk cost on or before thirty (30) days after the execution of the Agreement. (b) the sum of One Million United States (USD $1,000,000) Dollars toward the administrative and operational costs of the Concession and (c) fifty (50%) percent of any additional cost related to the Concession. The Company will provide further disclosure of this transaction including the name of the farmee when all conditions by all parties have been met. This Agreement is subject to regulatory and government approvals where required. On May 25, 2017 the Company announced that it has renegotiated the agreement with its farmout partner for a 50-per-cent working interest in its interest in a hydrocarbon concession in Tunisia. The conditions of the agreement call for Sunset to receive approval from the government of Tunisia for this agreement. The agreement also calls for Sunset to receive all government approvals to proceed to a work program on the concession. The farmee will provide a Swift-coded letter of credit for the sum of $5-million (U.S.) with the term of five years, that must be approved by the government of Tunisia's confirming bank. Pursuant to the agreement, the farmee will pay: To Sunset the sum of $2-million (U.S.) in sunk cost on or before 60 days after Sunset has received all approvals from the government of Tunisia; The sum of $1-million (U.S.) toward the administrative and operational costs of the concession after Sunset has received all approvals from the government of Tunisia; 50 per cent of any additional cost related to the concession. Sunset will provide further disclosure of this transaction, including the name of the farmee, when all conditions by all parties have been met. This agreement is subject to regulatory and government approvals, where required. Geoff Glenn, Chief Market Strategist Quant Research Group Disclaimer: The above information is opinion only. 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