Frontera And CGX Ink $19mn Loan Deal

(Frontera, 16.Apr.2021) — Frontera Energy Corporation and CGX Energy Inc., joint venture partners (the “Joint Venture“) in Petroleum Prospecting Licenses for the Corentyne and Demerara blocks offshore Guyana, announced today that they have entered into a term sheet for a $19mn loan (the “Loan”) that will enable CGX to continue to finance its share of costs related to the Corentyne, Demerara and Berbice blocks, the Berbice Deepwater Port, and other budgeted costs as agreed to by Frontera.

“Our joint venture with CGX represents a significant growth opportunity for both companies and is rooted in a commitment to the Guyanese government to develop these world class assets with a focus on local engagement and the development of infrastructure,” said Orlando Cabrales, Chief Executive Officer of Frontera. “Completing the loan agreement with CGX is an important step forward and the Joint Venture remains firmly on-track to spud its first offshore Guyana well as planned in the second half of this year.”

“These are exciting times for CGX, the Joint Venture and our stakeholders as we get closer to spudding Kawa-1,” said Professor Suresh Narine, Executive Co-Chairman of CGX. “We have exciting exploration plans for the Kawa-1 and Makarapan-1 wells on the Corentyne and Demerara Blocks and, as importantly, we are developing the infrastructure necessary to support and enhance broader energy and trade industry activity through the Berbice Deepwater Port Project. We look forward to executing on our programs and creating value and opportunity for our stakeholders.”

The Loan to CGX will be available for drawdown in tranches on a non-revolving basis until the earlier of 31 October 2021 or the date on which CGX (or its subsidiaries) enters into a binding transaction that provides funds to repay the amounts outstanding under the Loan. The Loan, together with all interest accrued, shall be due and payable on 30 June 2022, or such later date as determined by Frontera, at its sole discretion. Interest payable on the principal amount outstanding shall accrue at a rate of 9.7% per annum payable monthly in cash, with interest on overdue interest. If the Loan is extended by Frontera past 30 June 2022, at its sole discretion, the new interest rate will be 15% per annum. The Loan will be secured by all the assets of CGX. The Loan agreement also includes a standby fee of 2% multiplied by the daily average amount of unused commitment under the Loan payable quarterly in arrears by CGX during the drawdown period.

Subject to the approval of the TSX Venture Exchange (“TSXV“), Frontera in its sole discretion, may elect to convert all or a portion of the principal amount of the Loan into common shares in the capital of CGX at the conversion price per common share equal to $0.712 (being the U.S. dollar equivalent of the C$0.89 closing price of the common shares on the TSXV prior to the announcement of the Loan), or any amount as required by the TSXV, at any time (A) after 15 July 2021 and on or before 15 February 2022, in certain circumstances on the condition that Frontera first notifies CGX in writing of its decision to exercise its conversion right, and CGX either (i) fails to notify Frontera, within fifteen calendar days following delivery of the Frontera notice, that it will repay all amounts outstanding under the Loan in cash or (ii) fails to so repay all amounts outstanding under the Loan within fifteen calendar days following CGX’s timely notice of its intent to repay the Loan, or (B) after 15 February 2022, on the delivery of a conversion notice by Frontera if CGX Resources has as of 15 July 2021 entered into a binding transaction (which closing is subject to government approval only) that will provide it with funds to repay outstanding amounts under the Loan. The maximum number of common shares which may be acquired by Frontera upon the conversion of the Loan is 26,685,393 common shares, which represents approximately 9.28% of the currently issued and outstanding common shares of CGX.

The Loan contemplated by the term sheet remains subject to customary conditions, including the negotiation and execution of definitive agreements between Frontera and CGX and obtaining regulatory approvals. There is no guarantee that definitive agreements will be executed on the terms contemplated, or at all.

The transactions described herein between Frontera and CGX are related party transactions under Multilateral Instrument 61-101 but are exempt from the obligations to obtain a formal valuation and approval from a minority of shareholders. The material change report to be filed by CGX in connection with this news release will contain the required disclosure regarding such exemptions.