Toro Oil & Gas Ltd. Announces a Non-Dilutive Financing of $12 Million Upon Sale of Production Volume Royalty on Viking Rights and Establishes $4 Million Acquisition Fund

CALGARY, ALBERTA--(Marketwired - May 27, 2015) - Toro Oil & Gas Ltd. (TSX VENTURE:TOO) ("Toro" or the "Company") is pleased to announce it has entered into a binding letter agreement (the "Agreement") with Source Rock Royalties Ltd. ("Source Rock"), a private company, for a non-dilutive financing, which inclusive of a $4 million acquisition fund, total $16 million. In exchange for $12 million in cash proceeds, Toro commits to provide Source Rock with Viking light oil production volumes as a royalty (a "PVR"). Additionally, Source Rock will establish an acquisition fund of $4 million for the purpose of strategic acquisitions by Toro within the Viking light oil fairway (the "Acquisition Fund"). The $12 million PVR (the "Total PVR") is allocated into two separate components:

• An $8 million binding PVR in return for Toro providing royalty barrels starting at 33 bbls/d of light oil from Toro's Viking production base and escalating to 63 bbls/d by 2021; and
• A further $4 million PVR conditional upon Source Rock closing an external financing of at least $10 million, in return for Toro to provide royalty barrels starting at 17 bbls/d and escalating to 32 bbls/d by 2021.

Other key terms include:

• Toro will commit to drill eight (8) horizontal Viking light oil wells on or before June 1, 2016 on lands that relate to the binding PVR;
• The $8 million binding PVR will not be subject to any external financings completed by Source Rock;
• Toro will commit production barrels from its Hamilton Lake, Consort and Esther areas pursuant to the Total PVR;
• The Total PVR commitment extends for a seven and one-half (7.5) year term followed by a 20% annual decline, on a declining balance basis;
• Toro will issue 350,000 common shares to Source Rock at a deemed price equal to the ten day volume weighted average share price on the TSX Venture Exchange prior to the execution of the Agreement, allocated as to 233,333 common shares on the binding PVR and the balance, 116,667 common shares, on the conditional PVR. The share issuance is subject to the approval of the TSX Venture Exchange; and
• The parties anticipate that closing will occur on or before June 30, 2015.

Acquisition Fund