Cub Energy Inc. has contracted to purchase a new nitrogen rejection unit (“NRU”) to re-commence production on its wholly-owned RK field in Western Ukraine. The new NRU is manufactured in the United States by SepPro Systems Inc., which specializes in the design and manufacture of NRUs, as well other separation and recovery processes in the oil and gas sector. The new NRU is expected to be operational in Ukraine by yearend. The NRU comes with manufacturer warranties on operational capabilities and Sep-Pro will supervise the installation and field test of the NRU as part of its contracted services. Also, the NRU will be skid mounted so it can be utilized on any of the Company’s gas fields in the future.

Mikhail Afendikov, Chairman and CEO of Cub said: 
“The hiring of our new COO, Kerry Kendrick, resulted in a re-evaluation of the western Ukraine operations and we collectively believe the new NRU is the best option for Cub and its shareholders to resume production and cashflow at our wholly-owned RK field.”

The RK field production was suspended on April 1, 2016, upon the expiration of the Company’s gas blending agreement. The natural gas from the existing RK wells contains nitrogen content that exceeds the allowable limit per the Ukraine Code of Gas Pipeline System. The Company will also continue to optimize the used NRU it purchased in 2016; however it is not expected to yield material production.

Capital Financing

The new NRU is expected to cost approximately US $1.6 million with half this amount due in the first 30 days. To fund the purchase, the Company will utilize cash on hand and will borrow US $1 million from an officer of the Company. The Loan will bear interest at a rate of 6% per annum and payable monthly. The Company will also issue 2.2 million common shares to the Lender as a Loan bonus. The Loan will be repaid in four equal quartley installments commencing September 30, 2018 and ending on June 30, 2019. The Loan and the issuance of the common shares are subject to regulatory approval. The Lender was also granted security over Gastek which indirectly owns the 35% interest in KUB-Gas. The security is available on an event of default and limited only to the amount owing on the Loan including principal and interest. The security is pari passu and equal to the security granted to Pelicourt Ltd. under its existing line of credit.