Mr. Scott Lower reports

DUNE OIL ANNOUNCES CONVERSION OF DEBENTURES TO ELIMINATE DEBT

Dune Oil Corp. is converting its legacy 12.0 per cent convertible debentures at 15 cents per common share, in a transaction approved by the Canadian Securities Exchange, 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 Turkey.

Under the conversion, the amount due and owing, including principal and interest, shall be deemed to be $14-million. The settlement amount shall be convertible into common shares of the company at a price of 15 cents per common share. As a result, the company will be issuing an aggregate of 93,333,334 common shares to the convertible debentureholders. 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 Oct. 27, 2026. The CSE has approved the settlement in accordance with CSE Policy 4, as described below.

Scott Lower, chief executive officer 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 Turkey, at times of escalating oil prices in the region as Brent oil prices reach $117 (U.S.) nearing five-year highs. According to recent government reports, the Cudi-Gabar province in Turkey 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 66-2/3rds per cent 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), 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 $14-million (Canadian) 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 15 cents 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.
• 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.

CSE approval under Policy 4

Under CSE Policy 4, securityholder approval is ordinarily required for an issuance of securities that represents more than 100 per cent of the issuer's outstanding securities or more than 50 per cent where the issuance would result in a new 20-per-cent-plus holder. The settlement shares represent approximately 132.9 per cent of the 70,235,728 common shares currently outstanding. On closing, a certain convertible debentureholder and its affiliates would hold approximately 26.70 per cent of the outstanding common shares, which exceeds the 20-per-cent level at which a holder is presumed to be a control person under CSE policies. Securityholder 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 presettlement working capital deficit and near-term cash requirements. It has a $4.1-million (U.S.) M47 work program payment due on or before Nov. 15, 2026, and a $1-million (Canadian) settlement payable to a creditor due no later than Nov. 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 securityholder 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 per cent of the outstanding common shares and that more than 90 per cent 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 Nov. 15, 2026, payment date.

Postsettlement 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 per cent of the outstanding common shares. Upon the completion of the settlement, there will be three former convertible debentureholders that will hold more than 10 per cent 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 is a Canadian oil exploration company focused on Turkey. The company is advancing the onshore M47 oil exploration block (C3 and C4 licences) located in the Cudi-Gabar petroleum province of southeastern Turkey.

We seek Safe Harbor.