SUROCO ENERGY INC. This document is important and requires your immediate attention. If you are in doubt as to how to respond to the unsolicited offer made by Vetra Acquisition Ltd., you should consult with your investment dealer, stockbroker, lawyer or other professional advisor. Enquiries concerning the information in this document should be directed to Georgeson Shareholder Communications, the proxy solicitation agent retained by Suroco Energy Inc., Toll-Free in North America at 1-888-605-7641 or outside North America, collect at 781-575-2422 or via e-mail at askus@georgeson.com.
NOTICE OF CHANGE OF DIRECTORS' CIRCULAR RECOMMENDING REJECTION OF THE OFFER BY VETRA ACQUISITION LTD.to purchase all of the outstanding Common Shares of
at a price of $0.83 per Common Share
RECOMMENDATION TO SHAREHOLDERS
The Board of Directors UNANIMOUSLY recommends that Shareholders REJECTthe Vetra Offer and NOT TENDERtheir Common Shares to the Vetra Offer. The Board of Directors UNANIMOUSLY recommends that ShareholdersAPPROVE the Petroamerica Arrangement.
NOTICE TO SHAREHOLDERS IN THE UNITED STATES
Shareholders in the United States should read the important notice on page 3 of this Notice of Change.
JULY 7, 2014REJECT THE VETRA OFFER AND VOTE TO APPROVE THE PETROAMERICA ARRANGEMENT
Use only your MANAGEMENT FORM OF PROXY or MANAGEMENT VOTING INSTRUCTION FORM to vote IN FAVOUR of the Petroamerica Arrangement. If you have any questions, contact your broker or Georgeson, Toll-Free in North
America at 1-888-605-7641 or outside North America, collect at 781-575-2422 or via email at askus@georgeson.com .
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This Notice of Change, including the discussion of the reasons for the unanimous recommendation of the Board of Directors and Special Committee herein, contains information that constitutes "forward-looking information". These statements and information relate to future events. Forward-looking statements or information is frequently, but not always, characterized by words such as "will", "plan", "expect", "project", "intend", "believe", "anticipate", "budget", "forecast", "schedule", "estimate" and similar expressions, or statements that certain events or conditions "may", "should", "could", "might" or "will" occur and specifically include statements pertaining to Suroco's future performance, business prospects or opportunities, including information concerning the Vetra Offer and the completion and effect of the Petroamerica Arrangement. Readers are cautioned not to place undue reliance on forward-looking statements, as there can be no assurance that the plans, intentions or expectations upon which they are based will occur. By their nature, forward-looking statements include numerous assumptions, known and unknown risks and uncertainties, both general and specific, that contribute to the possibility that the predictions, estimates, forecasts, projections and other forward-looking statements will not occur, which may cause actual performance and results in future periods to differ materially from any estimates of projections of future performance or results expressed or implied by such forward-looking statements. Business priorities disclosed herein are objective only and their achievement cannot be guaranteed.
The forward-looking statements or information contained in this Notice of Change is based on the reasonable expectations and beliefs as at the date of this Notice of Change and involve numerous assumptions, known and unknown risks and uncertainties, both general and specific to Suroco and Petroamerica and the industry in which they operate. Such assumptions, risks and uncertainties include, but are not limited to: the inability to obtain regulatory approval for any operational activities; inability to get all necessary approvals for the completion of the Petroamerica Arrangement; the risks of the oil and gas industry in general, such as operational risks in exploring for, developing and producing crude oil and natural gas, market demand and unpredictable shortages of equipment and/or labour; potential delays or changes in plans with respect to exploration or development projects or capital expenditures; fluctuations in oil and gas prices, foreign currency exchange rates and interest rates; reliance on industry partners; and other factors, many of which are beyond the control of Suroco or Petroamerica. Should one or more of these risks and uncertainties materialize, or should underlying assumptions prove incorrect, actual results, performance or achievements of Suroco or the combined company upon completion of the Petroamerica Arrangement, or industry results, may vary materially from those described in this Notice of Change. You can find additional discussions of those assumptions, risks and uncertainties in Suroco's and Petroamerica's Canadian securities filings on SEDAR at www.sedar.com .
Although Suroco has attempted to identify important factors that could cause actual actions, events, results, performance or achievements to differ materially from those described in the forward-looking statements or information contained in this Notice of Change, there may be other factors that cause actions, events, results, performance or achievements not to be as anticipated, estimated or intended. There can be no assurance that forward-looking statements or information will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. Such forward-looking statements and information are made or given as at the date of this Notice of Change and Suroco disclaims any intention or obligation to update or revise any forward-looking statements or information, whether as a result of new information, future events or otherwise, except as required under applicable securities law. The reader is cautioned not to place undue reliance on forward- looking statements or information.
Unless otherwise stated, references to "dollars" and "$" in this Notice of Change are to Canadian dollars.
REJECT THE VETRA OFFER AND VOTE TO APPROVE THE PETROAMERICA ARRANGEMENT
Use only your MANAGEMENT FORM OF PROXY or MANAGEMENT VOTING INSTRUCTION FORM to vote IN FAVOUR of the Petroamerica Arrangement. If you have any questions, contact your broker or Georgeson, Toll-Free in North
America at 1-888-605-7641 or outside North America, collect at 781-575-2422 or via email at askus@georgeson.com .
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This Notice of Change has been prepared by Suroco in accordance with disclosure requirements under applicable Canadian law. Non-resident Shareholders should be aware that these requirements may be different from those of the United States or other jurisdictions. The enforcement by Shareholders of civil liabilities under United States federal securities laws may be affected adversely by the fact that Suroco is a corporation existing under the laws of Canada and that none of its officers and directors are residents of the United States. Shareholders in the United States may not be able to sue Suroco or its officers or directors in a foreign court for violation of United States securities laws. It may be difficult to compel such parties to subject themselves to the jurisdiction of a court in the United States or to enforce judgment obtained from a court of the United States.
CAPITALIZED TERMS
Unless the context indicates otherwise, capitalized terms which are used in this Notice of Change and not otherwise defined in this Notice of Change have the meanings given to such terms in the Directors' Circular dated June 20,
2013 at filed on the Corporation's SEDAR profile at www.sedar.com .
Suroco has adopted the standard of 6 thousand cubic feet:1 barrel of oil equivalent when converting natural gas to barrels of oil equivalent ("boe"). Boe's may be misleading, particularly if used in isolation. A boe conversion ratio of 6 thousand cubic feet:1 boe is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead. Given that the value ration based on the current price of oil as compared to natural gas is significantly different from the energy equivalency of 6:1 utilizing a conversion or a 6:1 basis may be misleading as an indication of value.
REJECT THE VETRA OFFER AND VOTE TO APPROVE THE PETROAMERICA ARRANGEMENT
Use only your MANAGEMENT FORM OF PROXY or MANAGEMENT VOTING INSTRUCTION FORM to vote IN FAVOUR of the Petroamerica Arrangement. If you have any questions, contact your broker or Georgeson, Toll-Free in North
America at 1-888-605-7641 or outside North America, collect at 781-575-2422 or via email at askus@georgeson.com .
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This Notice of Change amends and supplements the Directors' Circular dated June 20, 2014 (the "Directors' Circular") prepared by the Board of Directors of Suroco in connection with the unsolicited offer (the "Vetra Offer") by Vetra Acquisition Ltd. ("Vetra" or the "Offeror") to purchase all of the issued and outstanding Suroco Shares in the capital of Suroco at a price of $0.60 per Suroco Share pursuant to the Takeover Bid Circular dated June 9, 2014 (the "Bid Circular") as varied by the Notice of Variation dated June 18, 2014 (the June 18 Notice of Variation"), the Notice of Variation dated June 20, 2014 (the "June 20 Notice of Variation") and the Notice of Variation dated June 24, 2014 (the "June 24 Notice of Variation" and, together with the June 18 Notice of Variation and the June 20 Notice of Variation, the "Notice of Variation"). Since the date of the Directors' Circular, Vetra has filed the June 20 Notice of Variation, which increased the cash consideration under the Vetra Offer to
$0.75 per Suroco Share and the June 24 Notice of Variation, which increased the cash consideration under the Vetra
Offer to $0.83 per Suroco Share.
Since the date of the Directors' Circular the following developments have occurred:
• In the June 20 Notice of Variation, Vetra announced an increase in the price of its offer to Shareholders to purchase all of the issued and outstanding Suroco Shares to $0.75 in cash for each Suroco Share (the "Third Vetra Offer"). The Board and the independent committee of the Board (the "Special Committee") carefully considered and reviewed the Third Vetra Offer with the assistance of their financial and legal advisors. Upon the recommendation of the Special Committee, and based on the verbal advice of its financial advisor, Peters & Co. Limited, and its legal advisors, the Board unanimously reaffirmed its recommendation in favour of the Petroamerica Arrangement and concluded that the Petroamerica Arrangement is superior to the Third Vetra Offer.
• On June 21, 2014, the Special Committee retained Osler, Hoskin & Harcourt LLP as its independent legal counsel.
• On June 22, 2014, the first supplement (the "First Supplement") to Suroco's Information Circular and Proxy Statement dated May 27, 2014 (the " Initial Circular ") was filed on Suroco's issuer profile at www.sedar.com and on Suroco's website at www.suroco.com. The First Supplement was couriered or mailed to Shareholders on June 23 and 24, 2014.
• On the evening of June 23, 2014, Vetra announced a further increase in the price of its offer to Shareholders to purchase all of the issued and outstanding Suroco Shares to $0.83 in cash for each Suroco Share (the "Fourth Vetra Offer"), as disclosed in the June 24 Notice of Variation. The Special Committee and the Board carefully considered the Fourth Vetra Offer and, after receiving the advice of its financial and legal advisors, determined that this offer could reasonably be expected to constitute a "Superior Proposal" under the Arrangement Agreement.
• On June 25, 2014, the annual general and special meeting of the Shareholders to consider the Petroamerica Arrangement (the "Meeting") was properly convened and adjourned to June 30, 2014, to allow the Special Committee, the Board and Shareholders time to properly and carefully assess the Petroamerica Arrangement and the Fourth Vetra Offer.
• Between June 24, 2014 and July 1, 2014, Suroco, through its advisors, conducted negotiations with Vetra's advisors regarding the terms of a support agreement in connection with the Fourth Vetra Offer and the consideration being offered by Vetra in connection with the Fourth Vetra Offer.
REJECT THE VETRA OFFER AND VOTE TO APPROVE THE PETROAMERICA ARRANGEMENT
Use only your MANAGEMENT FORM OF PROXY or MANAGEMENT VOTING INSTRUCTION FORM to vote IN FAVOUR of the Petroamerica Arrangement. If you have any questions, contact your broker or Georgeson, Toll-Free in North
America at 1-888-605-7641 or outside North America, collect at 781-575-2422 or via email at askus@georgeson.com .
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• On June 28th and June 29th, 2014, the Special Committee and the Board met frequently to discuss the terms and conditions of the Fourth Vetra Offer and the Petroamerica Arrangement, among other considerations.
• On June 30, 2014, the Special Committee engaged Peters & Co. Limited to provide an updated Fairness
Opinion on the Petroamerica Arrangement (the "New Fairness Opinion"), which it did on July 3, 2014.
• On June 30, 2014, the Meeting was properly reconvened and adjourned to 10:00 a.m. (Calgary Time) on July 14, 2014. Suroco determined that the most prudent course of action was to further adjourn the Meeting to allow the Board to complete its consideration of the Petroamerica Arrangement and the Fourth Vetra Offer. The additional time allows Suroco to distribute any supplemental information it deems necessary and permits Shareholders to properly assess the Petroamerica Arrangement and the Fourth Vetra Offer.
• On July 3, 2014, the Special Committee met, along with Peters & Co. Limited and the independent legal advisors to the Special Committee, to discuss the results of its consideration of the Petroamerica Arrangement and the Fourth Vetra Offer and to make a recommendation to the Board.
• On July 3, 2014:
o Vetra submitted a new proposal (the "New Proposal") to the Board for its consideration. The New Proposal contemplated that Shareholders would receive, at their option, for each Suroco Share: (i) $0.83 in cash, or (ii) $0.80 and 1/1000 of a complex, unlisted contingent value right per Suroco Share; and
o the Special Committee met, along with Peters & Co. Limited and its independent legal advisors, to discuss the results of its consideration of the Petroamerica Arrangement and the Fourth Vetra Offer and to make a recommendation to the Board. See "New Fairness Opinion and Recommendations - Reasons for the Recommendation of the Special Committee" below; and
o later that day, the Board and the Special Committee met, along with Peters & Co. Limited and their respective legal advisors, to discuss the results of their consideration of the Petroamerica Arrangement and the Fourth Vetra Offer. After deliberations, the Board unanimously determined that the Fourth Vetra Offer was not a "Superior Proposal" under the Arrangement Agreement and unanimously reaffirmed its recommendation in favour of the Petroamerica Arrangement. See "New Fairness Opinion and Recommendations - Recommendation of the Suroco Board" below. When making this determination, the Board of Directors considered numerous factors, including the recommendation of the Special Committee (see " New Fairness Opinion and Recommendations - Recommendation of the Special Committee" below), the New Fairness Opinion, the transactional certainty associated with the Petroamerica Arrangement, the financial condition of Suroco and indications from a material group of Shareholders that they were not prepared to accept the Fourth Vetra Offer. During this meeting, each of the Special Committee and the Board also carefully considered and reviewed the New Proposal with the assistance of Peters & Co. Limited and their legal advisors. After presentations by the Special Committee and Peters & Co. Limited, the Board concluded that the consideration payable under the New Proposal was not compelling when compared to the potential upside to Shareholders under the Petroamerica Arrangement. After further discussions with its advisors, the Board also identified material concerns regarding the complexity of, and the legal, financial, timing and transactional risks associated with, the New Proposal. The Special Committee and Board were also informed that certain material Shareholders were not prepared to tender their Suroco Shares to the Fourth Vetra Offer, as amended by the New Proposal. Consequently, upon the recommendation of the Special Committee and after a consideration of the foregoing factors, the Board unanimously determined that the New Proposal could not reasonably be expected to constitute a "Superior Proposal" under the Arrangement Agreement.
REJECT THE VETRA OFFER AND VOTE TO APPROVE THE PETROAMERICA ARRANGEMENT
Use only your MANAGEMENT FORM OF PROXY or MANAGEMENT VOTING INSTRUCTION FORM to vote IN FAVOUR of the Petroamerica Arrangement. If you have any questions, contact your broker or Georgeson, Toll-Free in North
America at 1-888-605-7641 or outside North America, collect at 781-575-2422 or via email at askus@georgeson.com .
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• On July 4, 2014, the second supplement (the " Second Supplement ") to the Initial Circular was filed on Suroco's issuer profile at www.sedar.com and on Suroco's website at www.suroco.com. The Second Supplement was also couriered to Shareholders on July 4, 2014.
After careful consideration of the Vetra Offer (including the Third Vetra Offer and the Fourth Vetra Offer), including a review of the Bid Circular and related Notices of Variation, the Special Committee affirmed its conclusion that the Offer is not fair to Shareholders and is not in the best interests of the Corporation or the Shareholders and accordingly affirmed its recommendation to the Board of Directors that it recommend to the Shareholders that they reject the Offer and not tender their Suroco Shares to the Offer.
The Board of Directors, on the recommendation of the Special Committee of the Board of Directors, affirmed its recommendation that Shareholders reject Vetra's Offer and not tender their Suroco Shares.
The Special Committee retained Peters & Co. Limited to provide an opinion that considers the Petroamerica Arrangement and evaluate the fairness, from a financial point of view, to the Shareholders of the consideration offered thereunder. In the New Fairness Opinion, as of such date and based on and subject to the assumptions, factors considered and limitations described therein, Peters & Co. Limited is of the opinion that the consideration offered to Suroco Shareholders under the Petroamerica Arrangement, is fair, from a financial point of view, to Shareholders.
The full text of the New Fairness Opinion, setting out the assumptions made, matters considered and limitations and qualifications on the review undertaken in connection with the Fairness Opinion, is attached as Appendix "C" to the Second Supplement.
In reaching its determinations and recommendation, the Special Committee, with assistance of Peters & Co. Limited, as financial advisor, and its independent legal advisors, carefully reviewed the material features of the Arrangement Agreement, the Vetra Offer and the New Proposal and in making its determinations and recommendations relied on a number of substantive factors including, among others:
• the ability to share in the upside potential of Suroco's asset base upon the completion of the Petroamerica
Arrangement as compared to the Vetra Offer or the New Proposal;
• the risks to completing the Petroamerica Arrangement as compared to either the Vetra Offer or the New
Proposal;
• that the Petroamerica Arrangement gives Shareholders flexibility to elect form of consideration;
• the New Fairness Opinion;
• the receipt of written documentation from Shareholders, including Alentar, that hold or control in excess of
35% of the currently issued and outstanding Suroco Shares indicating their awareness of the Petroamerica Arrangement and the Vetra Offer, and that their preference is for the Petroamerica Arrangement, and specifically Petroamerica Shares, so that they can participate in what they believe to be the potential upside
of a combined Petroamerica and Suroco entity and the oil and gas properties;
• the belief that the Petroamerica Arrangement is likely to be completed in accordance with its terms;
REJECT THE VETRA OFFER AND VOTE TO APPROVE THE PETROAMERICA ARRANGEMENT
Use only your MANAGEMENT FORM OF PROXY or MANAGEMENT VOTING INSTRUCTION FORM to vote IN FAVOUR of the Petroamerica Arrangement. If you have any questions, contact your broker or Georgeson, Toll-Free in North
America at 1-888-605-7641 or outside North America, collect at 781-575-2422 or via email at askus@georgeson.com .
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• the Petroamerica Arrangement is subject to a determination of the Court of Queen's Bench of Alberta that the Petroamerica Arrangement is fair and reasonable to Shareholders;
• the proven track record of Petroamerica's management team and the business plans of Petroamerica;
• that Shareholders that oppose the Petroamerica Arrangement may, subject to compliance with certain terms and conditions, dissent with respect to the Arrangement Resolution and be entitled to be paid fair value for their Suroco Shares in accordance with section 191 of the Business Corporations Act (Alberta), the order of the Court of Queen's Bench of Alberta dated May 27, 2014 obtained in connection with the Petroamerica Arrangement, and the Petroamerica Arrangement;
• that Shareholders will have the opportunity to vote on the Petroamerica Arrangement, which requires the approval of at least 66Ҁ% of the votes cast by Shareholders and, pursuant to MI 61-101, a majority of votes cast by minority Shareholders; and
• the other risks and concerns associated with the New Proposal.
Recommendation of the Special Committee Having undertaken a thorough review of, and carefully considered, information concerning Suroco, Petroamerica, the Petroamerica Arrangement and the Vetra Offer, as described above, and after consultation in its evaluation thereof with its independent legal advisors and Peters & Co. Limited as financial advisor, the Special Committee UNANIMOUSLY recommended that the Board approve the Petroamerica Arrangement and reaffirm its recommendation that Shareholders vote FOR the Petroamerica Arrangement. Recommendation of the Suroco Board After completing a comprehensive evaluation of the Petroamerica Arrangement and the Vetra Offer, upon the recommendation of the Special Committee, and input from its legal counsel and Peters & Co. Limited, the Board reaffirms that it has unanimously determined that the Petroamerica Arrangement is in the best interests of Suroco, is fair, from a financial point of view, to the Shareholders and, UNANIMOUSLY recommends that the Shareholders vote IN FAVOUR of the Petroamerica Arrangement.
The Board has also unanimously determined that none of the Third Vetra Offer, the Fourth Vetra Offer or the New
Proposal is a "Superior Proposal" in relation to the Petroamerica Arrangement.
See "Reasons for Recommendation of the Board of Directors" and "Withdrawal of Tendered Shares" below.
In making its recommendations, the Board of Directors, with the assistance of its financial and legal advisors, carefully considered a number of factors and identified the following as being the most relevant to it continuing to recommend to Shareholders to APPROVEthe Petroamerica Arrangement, and its recommendations to Shareholders to REJECTthe Vetra Offer and NOT TENDERtheir Suroco Shares to the Vetra Offer.
• The Board believes that the proposed Petroamerica Arrangement will provide long term value. The Petroamerica Arrangement creates a combined company holding interests in eleven exploration and production contracts focused on high netback light and medium oil exploration and production in the Llanos and Putumayo Basins in Colombia, including the recently acquired 50% interest in the Putumayo 7
Block in Colombia that is immediately adjacent to the Suroriente Block. Suroco's management believes that the Putumayo 7 Block may contain an extension of the recently discovered Quinde field and when
drilled, is expected to add significant value to the combined company, under better economic terms than the
Suroriente Block.
REJECT THE VETRA OFFER AND VOTE TO APPROVE THE PETROAMERICA ARRANGEMENT
Use only your MANAGEMENT FORM OF PROXY or MANAGEMENT VOTING INSTRUCTION FORM to vote IN FAVOUR of the Petroamerica Arrangement. If you have any questions, contact your broker or Georgeson, Toll-Free in North
America at 1-888-605-7641 or outside North America, collect at 781-575-2422 or via email at askus@georgeson.com .
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• The Petroamerica Arrangement is supported by the largest Shareholder, by Suroco's directors and officers and by other Shareholders. Alentar, Suroco's largest shareholder, and Suroco's directors and officers have all confirmed that they continue to support the Petroamerica Arrangement. Such persons hold approximately 19.18% of the outstanding Suroco Shares (16.86% on a fully-diluted basis) and are parties to support agreements which require them to vote in favour of the Petroamerica Arrangement.
Furthermore, the Board has received written communications from Shareholders, including Alentar, that hold or control in excess of 35% of the currently issued and outstanding Suroco Shares, indicating their awareness of the Petroamerica Arrangement and the Fourth Vetra Offer, and that their preference is for the Petroamerica Arrangement, and specifically Petroamerica Shares, so that they can participate in what they believe to be the potential upside of a combined Petroamerica and Suroco and their oil and gas properties. As a result, the Petroamerica Arrangement is subject to less completion risk than the Vetra Offer.
• Analyst target prices for Petroamerica imply $1.04 per Suroco Share of potential value to Shareholders. Petroamerica is covered by seven research analysts (five of them unrestricted) with an average target price of $0.46 per Petroamerica Share (with a target price as high as $0.60 per Petroamerica Share), which equates to $1.04 per Suroco Share (or $1.33 per Suroco Share, using the highest target price) based on the exchange ratio per Suroco Share under the all share consideration option pursuant to the Petroamerica Arrangement, and further demonstrates the upside potential of the Petroamerica Arrangement to Shareholders.
• The growth and development of Petroamerica is expected to accelerate by the combination with Suroco. The Petroamerica Arrangement creates a combined company with a production base of approximately 9,000 barrels of oil equivalent per day (net before royalty) ("boepd") holding interests in eleven exploration and production contracts focused on high netback light and medium oil exploration and production in the Llanos and Putumayo Basins in Colombia. Petroamerica has stated that the Petroamerica Arrangement represents an important step towards realizing its vision of becoming a leading Colombia focused exploration and production player targeting oil production upwards of 30,000 boepd and a sustainable reserve life of more than five years. The combined asset base of both companies provides the potential to achieve these goals over a two to three year time frame. Petroamerica also expects that the combined company will be opportunistic in its pursuit of additional acquisitions in its Llanos and Putumayo basin core areas.• The combined company resulting from the Petroamerica Arrangement is expected have a strong, under-levered balance sheet that is expected to fully fund the future development and exploration of its asset base. As of July 3, 2014, Petroamerica held approximately US$100 million in cash and, upon the completion of the Petroamerica Arrangement and after the payment of expenses thereunder and Suroco's existing credit facilities and the issuance of the cash component of the consideration being offered pursuant to the Petroamerica Arrangement, expects to have at least US$35 million in cash and have only US$31.5 million in debt owing. For the 2014 fiscal year, Petroamerica expects the combined company to generate cash flows from operations of approximately US$116 million and have free cash flows (i.e. cash flow after all capital expenditures) of at least US$30 million. It is also anticipated that the combined company will generate significant cash flows from its production assets in 2015 and beyond. Recent strengthening of Brent oil prices should further enhance the financial capabilities of the combined company.
• Petroamerica has an established history of deal making and delivering reserves and production growth that has resulted in substantial value creation for its shareholders. Petroamerica has grown net production from an average of 155 boepd in the first quarter of 2012 to 6,478 boepd average in the first quarter of 2014. Petroamerica has also increased working interest proved plus probable reserves from 3.0 million barrels of oil equivalent as at December 31, 2011 to 4.9 million barrels of oil equivalent as at December 31, 2013 and Petroamerica's share price has appreciated more than 230% from the beginning of
2012 to the June 19, 2014 close of trading of the Petroamerica Shares.
REJECT THE VETRA OFFER AND VOTE TO APPROVE THE PETROAMERICA ARRANGEMENT
Use only your MANAGEMENT FORM OF PROXY or MANAGEMENT VOTING INSTRUCTION FORM to vote IN FAVOUR of the Petroamerica Arrangement. If you have any questions, contact your broker or Georgeson, Toll-Free in North
America at 1-888-605-7641 or outside North America, collect at 781-575-2422 or via email at askus@georgeson.com .
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• Shareholders will benefit from increased liquidity. Suroco's average daily dollar volume traded year-to- date on all Canadian exchanges and prior to the announcement of the execution of the Arrangement Agreement on April 28, 2014 was approximately $22,600 per day compared to Petroamerica's average daily dollar volume traded of approximately $472,300 per day over the same period. Petroamerica Shares are substantially more liquid than Suroco Shares. The increased size of the combined company after completion of the Petroamerica Arrangement can be expected to further enhance the liquidity of the Petroamerica Shares.
• The combined company resulting from the Petroamerica Arrangement will be better positioned to close the valuation gap with its Colombian peers. Petroamerica is currently trading considerably below its peer group valuation range based on current and forward looking production and cash flow estimates. The increased scale of the combined company, coupled with a strong balance sheet and an active 2014 drilling campaign, should position the combined company to close this valuation gap. Shareholders of the combined company would be expected to realize price appreciation should the combined company trade more in-line with peer group comparables.
• Access to additional sources of non-dilutive funding. Upon the completion of the Petroamerica Arrangement, the combined company is expected to initially be significantly under-levered compared to its peers. Petroamerica has stated that is has already begun to review a number of different options to refinance its US$31.5 million of long-term debt and that it anticipates that this alternative source of long-term debt financing will provide it with reduced interest costs and will eliminate any requirement to issue equity sweeteners in connection with the debt financing. As a result, the overall cost of capital to the combined company should be lower, with no expected adverse dilutive effect on the combined company's equity structure.
• Restructuring of Debt Facility. Petroamerica indicates that it is in advanced discussions with a number of financial institutions regarding a restructuring of its current debt facility on favourable terms to a larger sized and longer term debt facility that better reflects the strong financial position of the company.
The foregoing summary of the information and factors considered by the Board of Directors is not intended to be exhaustive of the information and factors considered by the Board of Directors in reaching its conclusions and continuing to recommend that Shareholders approve the Petroamerica Arrangement and recommending that Shareholders reject the Vetra Offer and withdraw any Shares tendered to the Vetra Offer, but includes the material information, factors and analysis considered by the Board of Directors in reaching its conclusion and recommendations. The members of the Board of Directors evaluated various factors summarized above in light of their own knowledge of the business, financial condition and prospects of Suroco and Petroamerica, and based upon the advice of its financial and legal advisors. In view of the numerous factors considered in connection with its further evaluation of the Petroamerica Arrangement and evaluation of the Vetra Offer, the Board of Directors did not find it practicable to, and did not, quantify or otherwise attempt to assign relative weight to specific factors in reaching its conclusion and recommendation. In addition, individual members of the Board of Directors may have given different weight to different factors. The conclusions and unanimous recommendations of the Board of Directors were made after considering all of the information and factors involved.
WITHDRAWAL OF TENDERED SHARES The Board of Directors UNANIMOUSLY recommends that Shareholders REJECT the Vetra Offer and NOTTENDER their Suroco Shares to the Vetra Offer. The Board of Directors advises any Shareholder who has tendered its Suroco Shares to the Vetra Offer to WITHDRAW those Suroco Shares. To reject the Vetra Offer, you should do nothing . Shareholders who have already tendered their Suroco Shares to the Vetra Offer can withdraw them at any time before they have been taken up by Vetra pursuant to the Vetra Offer. Shareholders holding their Suroco Shares through a brokerage firm or other nominee can contact their broker or nominee to withdraw the Suroco Shares on their behalf. Shareholders who would like to withdraw their Suroco Shares may also contact Georgeson, the Information Agent retained by Suroco, North America Toll-Free at 1-888-605-7641 or outside North America, collect at 781-575-2422 or via e-mail at askus@georgeson.com .REJECT THE VETRA OFFER AND VOTE TO APPROVE THE PETROAMERICA ARRANGEMENT
Use only your MANAGEMENT FORM OF PROXY or MANAGEMENT VOTING INSTRUCTION FORM to vote IN FAVOUR of the Petroamerica Arrangement. If you have any questions, contact your broker or Georgeson, Toll-Free in North
America at 1-888-605-7641 or outside North America, collect at 781-575-2422 or via email at askus@georgeson.com .
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Except as publicly disclosed or as referred to in this Notice of Change, none of the directors or officers of Suroco is aware of any information that indicates any material change in the affairs of Suroco since March 31, 2014, being the date of its last published financial statements.
STATUTORY RIGHTSSecurities legislation in the provinces and territories of Canada provides security holders of Suroco with, in addition to any other rights they may have at law, one or more rights of rescission, price revision or to damages, if there is a misrepresentation in a circular or notice that is required to be delivered to the security holders. However, such rights must be exercised within prescribed time limits. Securityholders should refer to the applicable provisions of the securities legislation of their province or territory for particulars of those rights or consult a lawyer.
APPROVAL OF NOTICE OF CHANGE OF DIRECTORS' CIRCULAR
The contents of this Notice of Change have been approved by the Board of Directors and its sending has been authorized by the Board of Directors.
REJECT THE VETRA OFFER AND VOTE TO APPROVE THE PETROAMERICA ARRANGEMENT
Use only your MANAGEMENT FORM OF PROXY or MANAGEMENT VOTING INSTRUCTION FORM to vote IN FAVOUR of the Petroamerica Arrangement. If you have any questions, contact your broker or Georgeson, Toll-Free in North
America at 1-888-605-7641 or outside North America, collect at 781-575-2422 or via email at askus@georgeson.com .
CERTIFICATE
July 7, 2014
The foregoing contains no untrue statement of a material fact and does not omit to state a material fact that is required to be stated or that is necessary to make a statement not misleading in light of the circumstances in which it was made.
(Signed) "Daryl Gilbert" Chairman and Director
(Signed) "Alastair Hill"
President, Chief Executive Officer and Director
REJECT THE VETRA OFFER AND VOTE TO APPROVE THE PETROAMERICA ARRANGEMENT
Use only your MANAGEMENT FORM OF PROXY or MANAGEMENT VOTING INSTRUCTION FORM to vote IN FAVOUR of the Petroamerica Arrangement. If you have any questions, contact your broker or Georgeson, Toll-Free in North
America at 1-888-605-7641 or outside North America, collect at 781-575-2422 or via email at askus@georgeson.com .
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