CRUZSUR ENERGY ANNOUNCES RESOLUTION OF DISPUTE AFFECTING SINU-9 & TIBURON BLOCKS AND AGREES TO FARMOUT TERMS FOR THE SINU-9 BLOCK

VANCOUVER, B.C., May 28, 2019 –CruzSur Energy Corp. (the “Company” or “CruzSur”) (TSXV: CZR), is pleased to announce that the disputes with the counterparties in the Company’s original acquisitions of economic beneficial interests in the Sinu-9 Block and Tiburon Block have been resolved and that terms for a new farmout agreement for the SN-9 Block have been agreed to with Panacol Oil & Gas (“Panacol”).

In August 2018, the Company received a letter from Clean Energy Resources S.A.S (“Clean“) as party to the Purchase and Sale Agreement for the SN-9 Block (“SN9 PSA“) pursuant to which the Company initially received its 80% economic beneficial interest in January 2017, alleging that the Company was in breach of certain obligations under the SN‑9 PSA and that as a consequence the SN‑9 PSA was immediately terminated. The Company also received an identical letter from ColPan Oil & Gas Limited (“ColPan“), as counterparty to the Purchase and Sale Agreement for the Tiburon Block (“Tiburon PSA“) by which the Company initially received its 60% economic beneficial interest in February 2017, alleging that the Company was in breach of certain obligations under the Tiburon PSA and that as a consequence the Tiburon PSA was immediately terminated. The Company refutes that either of these claims have any merit, however, it engaged with the counterparties in order to find a resolution to the dispute.

The outcome of these discussions is that the Company has agreed to terms with the counterparties whereby each party will continue forward with the original SN-9 PSA and Tiburon PSA, respectively, with certain amending terms which are outlined below.

Resolution terms for SN-9 Block with Clean

• Clean’s participation in the SN-9 Block will increase from a 5% to a 13% interest reducing the Company’s share from 80% to 72%, which will comprise two components:

• First component – the original carried working interest will increase by 3%, from 5% to 8%

• Second component – Clean will acquire an additional 5% by one of two options:

♦ Option 1 – payment of US$1.2 million to the Company if Clean chooses to only participate in the first phase of the exploration program.

♦ Option 2 – payment of US$2.9 million to the Company if Clean chooses to participate in both phases of the exploration program.

Payment to the Company for either option will be received through the sale of 62.5% of Clean’s production on the SN-9 Block corresponding to this 5% interest. Furthermore, the share of Net Profit Interest and Overriding Royalties (as defined in the SN-9 PSA) related to this additional 5% working interest will be the obligation of Clean and not carried by the Company.

Resolution terms for Tiburon Block with ColPan

• CruzSur will earn its economic beneficial interest based on the executed work program as follows:

♦ 10% working interest on the completion of the Phase 3 3D seismic commitment

♦ An additional 15% working interest on the drilling and testing of one exploration well

♦ A further 15% working interest on the drilling and testing of a second exploration well

• After completing the 3D seismic commitment, CruzSur is not obligated to drill any of the exploration wells and can exit the contract with no further commitments, but will lose the US$310,000 performance guarantee currently held in deposit with the Colombian National Hydrocarbon Agency (“ANH”); alternatively, CruzSur may elect to stay in the license with a 10% working interest.

• CruzSur will cover, in the form of a loan, unpaid management fees of US$120,000 arising from the dispute period. This money will be returned to CruzSur if the Company is still participating in the block when the ANH performance guarantee is returned at the end of the Phase 3 commitment.

• In the event that CruzSur does not fulfill the Phase 3 commitment, except for reasons beyond its control, CruzSur will cede a 1.5% carried working interest in the SN-9 Block to Colpan, and forfeit the aforementioned US$120,000 loan.

Non-Binding Letter of Intent for Panacol to Farm-in to the SN-9 Block

In parallel with resolving the above mentioned dispute,  the Company has also negotiated terms for a farmout agreement with Panacol on the SN-9 Block through a non-binding letter of intent, the details of which are as follows:

• Panacol is to finance the ANH Phase 1 minimum exploration commitment of US$22.3 million through the provision of services at market rates.

• CruzSur will reimburse Panacol for its portion of these costs (“SN-9 Investment Costs”) out of 60% of its share of any commercial production realized from the SN-9 Block, after deduction of costs, royalties and Net Profit Interest.

• Panacol will share equally in the revised terms required to resolve the SN-9 dispute with Clean.

• Panacol will acquire a participating interest of 36% upon completion of the ANH Phase 1 commitments.

• Additionally, Panacol and their Seismic investor will finance the acquisition of 70km2 of 3D seismic on the Tiburon block through services up to a value of US$5 million and, upon completion of the commitment, will receive an additional 1.5% working interest in the SN-9 Block coming from CruzSur’s 36% working interest. The seismic acquisition costs are to be paid by CruzSur out of 60% of its commercial production from the SN-9 Block after costs, royalties and Net Profit Interest.

• Panacol will be entitled to receive the US$2.4 million ANH performance guarantee when returned by the ANH upon completion of the Phase 1 commitments.

• Panacol will recognize past costs of US$600,000 which are to be deducted from the SN-9 Investment Costs to be repaid by CruzSur out of commercial production.

• Panacol and CruzSur will share the SN-9 PSA commitments proportionally relative to their respective working interests, and will include:

♦ Carry of Clean for Phase 1 exploration commitments as defined in ANH contract.

♦ Should the parties elect to proceed to Phase 2, carry of Clean for the Phase 2 exploration commitments as defined in the ANH contract.

♦ Net Profit Interest of US$6.5 million to be paid out of 60% of production share.

♦ Overriding Royalty of 6% to be paid to Clean.

• Expenditures outside of the minimum work commitment will be divided between the parties in proportion to their participating interest.

• Upon acceptance of the non-binding letter of intent, the Parties will complete a definitive Farmout Agreement

Following execution of the above agreements between Clean, ColPan and Panacol , the participating interests of the respective parties in the SN-9 Block will be as follows:

• CruzSur    5%

• Panacol     5%                  

• Clean       13%

• Oleum     15%

About CruzSur Energy Corp.

CruzSur Energy Corp. is a publicly traded E&P company focused on proven oil & gas plays in Latin America. The Company holds a large diversified portfolio of producing, development and unexploited assets in Colombia and Argentina where it will leverage its amplitude of technical expertise and proven track record building companies and creating value.

Complete reports and statements are available on SEDAR at www.sedar.com and on the Company website www.cruzsur.energy

Forward-Looking Information

Except for the statements of historical fact, this news release contains “forward-looking information” within the meaning of the applicable Canadian securities legislation that is based on expectations, estimates and projections as at the date of this news release.  More particularly, this press release contains statements concerning (i) the settlement of outstanding disputes with Clean and ColPan, (ii) drilling plans, (iii) expected rates of production, (iv) the resulting cash flow from added production, (v) changes in the working interest of various parties to the SN-9 PSA and the Tiburon PSA, (vi) the payment of various amounts to various parties to the aforementioned transactions, and (vii) exploration and seismic commitments. The forward-looking statements contained in this document are based on certain key expectations and assumptions made by the Company, including expectations and assumptions concerning the success of future drilling and development activities, the performance of existing wells, the performance of new wells, the successful application of technology and prevailing commodity prices.

Although the Company believes that the expectations and assumptions on which the forward-looking statements are based are reasonable, undue reliance should not be placed on the forward-looking statements because the Company can give no assurance that they will prove to be correct. Since forward looking statements address future events and conditions, by their very nature they involve inherent risks and uncertainties. Actual results could differ materially from those currently anticipated due to a number of factors and risks. These include, but are not limited to, risks associated with the oil and gas industry in general (e.g., operational risks in development, exploration and production; delays or changes in plans with respect to exploration or development projects or capital expenditures; the uncertainty of reserve estimates; the uncertainty of estimates and projections relating to production, costs and expenses, and health, safety and environmental risks), commodity price and exchange rate fluctuations and uncertainties resulting from potential delays or changes in plans with respect to exploration or development projects, capital expenditures or governmental policies and regulations.

Any forward-looking information speaks only as of the date on which it is made and, except as may be required by applicable securities laws, the Company disclaims any intent or obligation to update any forward-looking information, whether as a result of new information, future events or results or otherwise.

Neither the TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.

For further information:

CruzSur Energy Corp.

Ralph Gillcrist
CEO & President

Chris Reid
CFO

Tel: (604) 609-6110