Dune Oil Announces Conversion of Debentures to Eliminate Debt

The planned debt-for-equity settlement pairs liability relief with dilution and leaves near-term M47 and creditor payments due.

Rhea-AI Summary

Dune Oil (DUNXF) announced a planned conversion of C$14 million in convertible debenture obligations into common shares, eliminating those obligations upon closing. Settlement is expected on or about October 27, 2026, through issuance of 93,333,334 shares at C$0.15 each. The settlement covers principal and interest on legacy 12.0% debentures, with remaining amounts forgiven.

The CSE approved a hardship exemption allowing settlement without shareholder approval, based on a pre-settlement working capital deficit and near-term cash needs. Payments include US$4.1 million for the M47 work program by November 15 and C$1 million to a creditor by November 30, 2026. Outstanding shares will rise to 163,569,062, leaving existing shareholders with approximately 42.94%. Settlement shares carry a contractual lockup with releases over 36 months. Dune plans to advance its M47 oil block work program over the next 12 months.

3 points · 1 major

NegativeiHow this balance works

How this balance works

Rhea-AI gives every point it takes from this document a weight. Minor counts 1, Moderate 3 and Major 9, so one Major point outweighs several Minor ones. The bar adds up the weights on each side, and when neither side holds more than 65% of the total the balance reads Mixed.

It reads the document as published, with the same rules for every company, and it does not look at what the market expected or at how the stock traded, so a point can be objectively good on a day the stock falls.

Rhea-AI Sentiment measures something else, the tone of the wording.

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2 major · 6 points

Hollow bars mark forward-looking points. How the balance works

Positive

• Major point. Forward-looking: it has not happened yet and may not happen.Settlement would extinguish C$14,000,000 in deemed debenture principal and interest and forgive remaining amounts owing.
• Minor point. Forward-looking: it has not happened yet and may not happen.Settlement shares face a 36-month contractual lockup release schedule.
• Minor point. Forward-looking: it has not happened yet and may not happen.Dune plans to advance the M47 work program over the next 12 months.

Negative

• Major point. Forward-looking: it has not happened yet and may not happen.Issuance of 93,333,334 shares at C$0.15 leaves existing shareholders with approximately 42.94% ownership.
• Major point. Forward-looking: it has not happened yet and may not happen.An US$4.1 million M47 work-program payment is due on or before November 15, 2026. 79% of market cap
• Moderate pointA pre-settlement working capital deficit underpins reliance on the hardship exemption.
• Moderate point. Forward-looking: it has not happened yet and may not happen.A C$1 million creditor settlement is payable no later than November 30, 2026.
• Minor point. Forward-looking: it has not happened yet and may not happen.One debentureholder and affiliates would hold approximately 26.70%, exceeding the CSE's presumed Control Person threshold.
• Minor pointThe approved hardship exemption allows settlement without seeking shareholder approval.

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• The elimination of all outstanding convertible debenture obligations significantly deleverages the Company, enhancing financial flexibility
• Positions the Company to focus on advancing onshore M47 oil block and capitalize on a strong Brent crude oil pricing environment

Vancouver, British Columbia--(Newsfile Corp. - October 26, 2026) - Dune Oil Corp. (CSE: DUNE) (OTCQB: DUNXF) (FSE: Z62) ("Dune" or the "Company") is pleased to announce the conversion of the Company's legacy 12.0% convertible debentures (the "Convertible Debentures") at $0.15 per common share, in a transaction approved by the Canadian Securities Exchange (the "CSE") designed to materially strengthen the Company's balance sheet to advance the M47 oil block work program over the next 12 months in the Cudi-Gabar province southeastern Türkiye.

Under the conversion, the amount due and owing including principal and interest shall be deemed to be $14,000,000 (the "Settlement Amount"). The Settlement Amount shall be convertible into common shares of the Company (the "Common Shares") at a price of $0.15 per Common Share. As a result, the Company will be issuing an aggregate of 93,333,334 Common Shares (the "Settlement Shares") to the convertible debenture holders. Upon conversion, all obligations relating to the Convertible Debentures shall be extinguished and the Convertible Debenture will no longer be outstanding.

All Settlement Shares will be subject to a contractual lock up with a release schedule over a period of 36 months. The Company expects to complete the settlement on or about October 27, 2026. The CSE has approved the settlement in accordance with CSE Policy 4, as described below.

Scott Lower, CEO of Dune, stated "This debenture conversion significantly strengthens the Company's balance sheet and clears the way for our next stage of growth. We look forward to executing our plans for the next phase of work on the M47 oil project, in the Cudi-Gabar province of southeastern Türkiye, at times of escalating oil prices in the region as Brent oil prices reach US$117 nearing 5 year highs. According to recent government reports, the Cudi-Gabar province in Türkiye has reached a record of 83,300 barrels per day of oil production, with cumulative crude oil production exceeding 50 million barrels since production began in 2021."

Settlement Terms

Debentureholders holding at least 66⅔% of the principal amount of the outstanding Convertible Debentures approved the settlement. A fifth supplemental indenture to the debenture indenture dated April 20, 2023 (as amended and supplemented, the "Indenture") has been signed to give effect to the transaction. The principal terms are:

• the aggregate amount due under the Indenture, including principal and interest, is deemed to be CAD$14,000,000, and all further amounts otherwise owing are written off;

• the Settlement Amount will be settled through the issuance of 93,333,334 Common Shares at a fixed price of C$0.15 per share, in full and final settlement of all amounts owing under the Convertible Debentures;

• no warrants or other securities will be issued in connection with the settlement; and

• the issuance of the Settlement Shares, the forgiveness of all remaining amounts owing and the cancellation of all outstanding Convertible Debentures will occur together on the closing date of the settlement (the "Settlement Closing Date").

CSE Approval Under Policy 4

Under CSE Policy 4, security holder approval is ordinarily required for an issuance of securities that represents more than 100% of the issuer's outstanding securities, or more than 50% where the issuance would result in a new 20% plus holder. The Settlement Shares represent approximately 132.9% of the 70,235,728 common shares currently outstanding. On closing, a certain convertible debenture holder and its affiliates, would hold approximately 26.70% of the outstanding common shares, which exceeds the 20% level at which a holder is presumed to be a Control Person under CSE policies. Security holder approval would therefore ordinarily be required, absent an exception.

The Company applied for, and the CSE has accepted, reliance on the hardship exemption in section 4.6(2)(b) of CSE Policy 4. The Company will not seek security holder approval for the settlement. The Company's reliance is principally based on the exemption is based on the pre-settlement working capital deficit and near-term cash requirements. It has a US$4.1 million M47 work-program payment due on or before November 15, 2026 and a C$1 million settlement payable to a creditor due no later than November 30, 2026. The settlement is designed to improve the Company's financial position by eliminating the Company's largest liability and enhancing its financial flexibility.

No Related Person of the Company (as defined in CSE policies) is participating in the settlement.

The Company's independent directors, comprising a majority of the Board's independent directors, are free from any interest in the settlement and voted without the participation of the other directors. They have determined that the settlement is in the best interests of the Company and reasonable in the circumstances. They have also determined that it is not feasible to obtain security holder approval or to complete a rights offering on the same terms within the time available.

In reaching that determination, the independent directors considered that the Company has more than 5,000 shareholders, that no shareholder holds more than 5% of the outstanding common shares, and that more than 90% of the shares are held through brokerage accounts. The timelines in National Instrument 54-101 for reaching beneficial holders would not permit a shareholder meeting, or the collection of written consents from holders of a majority of the shares, before the November 15, 2026 payment date.

Post-Settlement Shares Outstanding

On completion of the settlement, the Company will have 163,569,062 common shares outstanding, and the Company's existing shareholders will hold approximately 42.94% of the outstanding common shares. Upon the completion of the settlement, there will be three former Convertible Debenture shareholders which will hold more than 10% of the outstanding common shares. Each will be an insider of the Company and may be required to file an early warning report under applicable securities laws.

The settlement is being completed as part of the Company's recapitalization and is not intended to effect a change of control of the Company. No debentureholder will receive any board nomination, management, veto, special voting or other governance right as a result of the settlement. The debentureholders have confirmed that they do not intend, by reason of the settlement, to acquire or exercise control over the Company. The Company has not entered into any voting, support or standstill agreement with any debentureholder in connection with the settlement.

About Dune Oil Corp.

Dune Oil Corp. is a Canadian oil exploration company focused on Türkiye. The Company is advancing the onshore M47 oil exploration block (C3 and C4 licences) located in the Cudi-Gabar petroleum province of southeastern Türkiye. More information may be found on www.sedarplus.ca and on the Company's website at www.duneoil.ca.

Requests for further information should be directed to:

Scott Lower, President and Chief Executive Officer

Dune Oil Corp.
Suite 700, 838 West Hastings Street
Vancouver, B.C., V6C 0A6
Phone: 1-778-819-1585
Email: info@duneoil.ca
Website: www.duneoil.ca

Cautionary Statement Regarding Forward-Looking Information

Neither the Canadian Securities Exchange nor its regulation services provider accepts responsibility for the adequacy or accuracy of this news release.

To view the source version of this press release, please visit https://www.newsfilecorp.com/release/320866

FAQ

AI-generated questions and answers. How Rhea-AI works. Not financial advice.

What are the terms and expected closing date of Dune Oil's debenture conversion?

Dune expects to settle the debentures on or about October 27, 2026, issuing 93,333,334 common shares at C$0.15 each. The deemed settlement amount is C$14,000,000, including principal and interest. Issuance, forgiveness of remaining amounts and cancellation of the debentures will occur together at closing.

How much will Dune Oil's debenture conversion dilute existing shareholders?

Existing shareholders will hold approximately 42.94% of Dune's outstanding common shares after settlement. The company currently has 70,235,728 shares outstanding and will have 163,569,062 upon completion. The settlement shares represent approximately 132.9% of the current outstanding shares.

Will Dune Oil's debentureholders receive governance rights in the settlement?

Debentureholders will receive no board nomination, management, veto, special voting or other governance rights through the settlement. No voting, support or standstill agreement has been entered into with any debentureholder in connection with it. Three former debentureholders will each hold more than 10% of outstanding common shares and become insiders upon completion.

What debentureholder approval did Dune Oil obtain for the settlement?

Holders of at least 66⅔% of outstanding debenture principal approved the settlement. A fifth supplemental indenture has been signed to give effect to the transaction. No Related Person of Dune, as defined under CSE policies, is participating.