(CGX, 22.Jul.2022) — CGX Energy Inc. (TSXV: OYL) and Frontera Energy Corporation (TSX: FEC), joint venture partners in the Petroleum Prospecting License for the Corentyne block offshore Guyana, announces today that the companies have entered into an agreement to amend the Joint Operating Agreement originally signed between CGX and a subsidiary of Frontera on 30 January 2019, as amended, effectively farming into the Corentyne block and securing funding for the Wei-1 exploration well.
The agreement remains subject to certain conditions precedent, including approval of the TSX Venture Exchange (which is subject to the receipt by CGX of a formal valuation), TSX acceptance of the agreement, and certain confirmations from the Government of Guyana relating to the petroleum agreement for the Corentyne block.
“CGX is pleased to complete this farm-in agreement with Frontera, which enables CGX to strengthen its balance sheet and secure funding for the Wei-1 exploration well. Our continued partnership with Frontera reflects the significant value we have created on the Corentyne license and the opportunity set that is now before us following the discovery of hydrocarbons at the Kawa-1 exploration well. We are focused now on the transformational potential of the Corentyne block ahead of spudding the Wei-1 exploration well in October 2022, pending rig release from the current operator,” said Professor Suresh Narine, Executive Co-Chairman of CGX.
“Frontera is excited to complete this agreement with CGX and continue our work together on the Corentyne Block,” said Orlando Cabrales, Chief Executive Officer of Frontera. “Building on the Joint Venture’s recent light oil and condensate discovery at the Kawa-1 exploration well, the Agreement supports CGX’s capital needs for the Wei-1 exploration well and provides Frontera with an increased participating interest in the Corentyne block, which is truly one of the most exciting exploration areas in the world.”
As part of the Agreement, CGX will transfer 29.73% of its participating interest in the Corentyne block to Frontera in exchange for Frontera funding the joint venture’s costs associated with the Wei-1 exploration well for up to $130mn and up to an additional $29mn of certain Kawa-1 exploration well, Wei-1 pre-drill, and other costs. In addition, CGX shall assign an additional 4.94% of its participating interest in the Corentyne block to Frontera as consideration for the repayment of the outstanding principal amounts under (i) the previously announced $19mn convertible loan to CGX dated 28 May 2021, as amended, and (ii) the previously announced $35mn convertible loan to CGX dated 10 March 2022, as amended, and a cash payment of $3.8mn. As a result of this agreement, CGX will have a 32.00% participating interest and Frontera will have a 68.00% participating interest in the Corentyne block.
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. Nevertheless, CGX is in the process of obtaining a formal valuation for the Corentyne block in connection with the Agreement, in accordance with TSX Venture Exchange requirements. The material change report to be filed by CGX in connection with this news release will contain the required disclosure regarding such exemptions and the formal valuation for the Corentyne block obtained by CGX.