Letter to Shareholders

WEF OSUM ACQUISITION CORP OFFER TO PURCHASE FOR CASH OSUM OIL SANDS CORP.
November 4, 2020

Dear Osum Oil Sands Corp. Shareholder,

On behalf of WEF Osum Acquisition Corp. (the “Offeror”), a company wholly-owned by Waterous Energy Fund (Canadian) LP, Waterous Energy Fund (US) LP, Waterous Energy Fund (International) LP, WEF Osum Co-Invest I LP, WEF Osum Co-Invest II LP and WEF Osum Co-Invest III LP (collectively, “WEF”), each an Alberta limited partnership managed by Waterous Energy Fund Management Corp., we invite you to consider our offer (“Offer”) for your common shares (“Common Shares”) of Osum Oil Sands Corp. (“Osum”). Our Offer gives you the opportunity to realize fair value and immediate liquidity for your investment.

Under the terms of the Offer, Osum's shareholders will receive $2.40 in cash for each Common Share subject to the Offer (the “Offer Price”).

WEF is currently the owner of approximately 45% of the outstanding Common Shares. The Offeror is making this Offer to acquire up to a maximum of 52,500,000 of Osum's remaining outstanding Common Shares, or approximately 72% of the shares not already owned by WEF. If the Offer is successful, the Offeror intends to acquire all of the remaining Common Shares not validly deposited under the Offer, or not taken up pursuant to the Offer, as applicable, for the same $2.40 in cash for each Common Share, as soon as possible following, but no later than 120 days after, the date of expiry of the Offer, by causing one or more special meetings to be called of the then holders of Common Shares to consider an amalgamation, statutory arrangement, capital reorganization, amendment to its articles, consolidation or other transaction involving the Offeror and/or an affiliate of the Offeror and Osum and/or the Osum shareholders for the purpose of Osum becoming, directly or indirectly, a wholly-owned subsidiary of the Offeror.

Reasons to Accept the Offer

• Largest Three Shareholders Have Already Exited at the Offer Price. On July 31, 2020, Blackstone Capital Partners, Warburg Pincus LLC and GIC Private Limited sold their Common Shares, representing approximately 45% of the equity ownership in Osum, to WEF at the Offer Price. The Initial Selling Shareholders were Osum's largest investors and had the right to appoint (in the case of GIC Private Limited, through a group of other institutional investors) five of the nine directors on Osum's board of directors. These investors are highly sophisticated global financial institutions with extensive experience in the Canadian oil and gas industry. These investors and their financial advisors ran a thorough and competitive sale process for their Common Shares which involved a number of arm's length third party bidders and WEF was the successful bidder in that process by paying the highest price. The rigor of the process leading to the sale by three independent shareholder groups should give Osum's shareholders confidence that fair market value for the Common Shares was established.

• Next Five Largest Shareholders Have Agreed to Tender at the Offer Price. Waterous Energy Fund Management Corp., on behalf of the Offeror, has executed lock-up agreements with certain Osum shareholders (the "Locked-Up Shareholders"), under which, subject to certain conditions, the Locked-Up Shareholders have agreed to tender their Common Shares to the Offer. The Locked-Up Shareholders hold Common Shares representing in aggregate approximately 19% of the total outstanding Common Shares or approximately 35% of the Common Shares not already owned by WEF.

• Full and Fair Value. The Offer price of $2.40 per Common Share represents an attractive value that fairly reflects Osum's asset base, business plan and current economic environment. This is also the same consideration paid by WEF in its initial arm's length transaction with the Initial Selling Shareholders. Since transacting with the Initial Selling Shareholders, the price of West Texas Intermediate crude oil has dropped (as of the date of the Offer), and the industry has continued to face headwinds. Given the increased uncertainty in the sector, we believe offering the same offer price is highly compelling for Osum's shareholders today. We believe that the Offer represents full and fair value for your Common Shares.

• Liquidity and Certainty of Value. The Offer provides 100% cash consideration for the Common Shares subject to the Offer, giving Osum's shareholders certainty of value and immediate liquidity in the face of volatile markets. The status quo alternative for Osum's shareholders is highly uncertain given the lack of dividends and liquidity options.

• Fully Financed Offer. The Offer is not subject to a financing condition. The Offeror has secured, on a committed basis, all financing required to fund the entire consideration payable for the Common Shares subject to the Offer.

• High Likelihood of Completion. In order for the Offer to be successful, the Offeror must satisfy the Minimum Tender Condition (defined in the accompanying Offer to Purchase and Circular), such that more than 50% of the Common Shares not currently owned by WEF are tendered. The Common Shares subject to the Lock-Up Agreements already represent approximately 35% of the outstanding Common Shares not currently owned by WEF, or approximately 70% of the outstanding Common Shares required to be tendered to achieve the Minimum Tender Condition. Accordingly, the Offeror believes there is a high likelihood that it will achieve the Minimum Tender Condition and that the Offer will be successful.

Status Quo is a Risky Option for Your Investment

• Competing Offer Highly Unlikely. The Offeror believes that it is highly unlikely that a competing all-cash offer for the Common Shares not already owned by WEF will be made at a premium to the price being offered by the Offeror, particularly in light of the thorough auction process run by the Initial Selling Shareholders throughout the spring and summer of 2020. Moreover, because WEF already owns approximately 45% of the Common Shares, any alternative transaction involving the acquisition of Osum would be subject to WEF's approval.

• Failure to Return Capital to Shareholders or Provide any Meaningful Liquidity Event. Osum's business plan is not compelling in the current macroeconomic environment. 15 years after being formed, Osum still has not been able to pay a dividend to its owners or achieve an initial public offering or other value enhancing transaction to provide its shareholders with a liquidity event.

You can tender your Common Shares to the Offer now by contacting your broker or our Depositary and Information Agent, Kingsdale Advisors. The Offer expires at 5:00 p.m. (Calgary time) on February 24, 2021, unless extended, varied or withdrawn by the Offeror in accordance with its terms. If you have any questions or require assistance, please contact Kingsdale Advisors, by telephone toll-free in North America at 1-866-229-8166 and outside of North America at 1-416-867-2272 or by e-mail at contactus@kingsdaleadvisors.com

Sincerely,

WEF OSUM ACQUISITION CORP.

(signed) “Adam Waterous”

Adam Waterous
President and Director

 

Tender Now