CGX Energy negotiates $35 million loan agreement with Frontera

By Marisa Wong

Los Angeles, March 11 – Frontera Energy Corp. and CGX Energy Inc. announced they entered into a financing agreement for a $35 million loan.

Frontera and CGX are joint venture partners in the petroleum prospecting license for the Corentyne block offshore Guyana. The loan will enable CGX to continue to finance part of its share of costs related to the Corentyne block, the Berbice deepwater port and other budgeted costs as agreed to with Frontera, according to a press release.

The loan to CGX will be available in tranches on a non-revolving basis until the earlier of July 31 or the date on which CGX has drawn down the maximum amount of the loan.

The loan, which bears interest at 9.7%, will be due and payable July 31, 2022. If the loan is extended by Frontera, the new interest rate will be 15%.

A standby fee of 2% multiplied by the daily average amount of unused commitment under the loan in excess of $19 million will be payable quarterly in arrears during the drawdown period.

The loan will be secured by all of the assets of CGX.

Subject to the approval of the TSX Venture Exchange, Frontera may, on or after July 31, elect to convert all or a portion of the principal amount of the loan outstanding into common shares of CGX at a conversion price of $2.42 per common share.

CGX has the right to prepay all or any portion of the loan prior to maturity. CGX is also required to repay all of the loan in the event that without the consent of Frontera it issues any security that would dilute Frontera’s current ownership of CGX or any of its subsidiaries enters into any transaction for proceeds to be used by CGX to pay its part of the authorized costs of Wei-1.

The loan remains subject to some conditions, including obtaining regulatory approvals.

CGX is a Canadian-based oil and gas exploration company focused on the exploration of oil in the Guyana-Suriname Basin and the development of a deep-water port in Berbice, Guyana.

Frontera is a Toronto-based company involved in the exploration, development, production, transportation, storage and sale of oil and natural gas in South America.

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