CGX taps US$19 million loan from Frontera for Guyana projects

Canadian oil and gas companies Frontera Energy and CGX Energy have entered into a term sheet for a US$19 million loan which will enable CGX to continue to finance its share of costs related to the Corentyne, Demerara, and Berbice blocks off Guyana.

 

Frontera said that the loan would also allow CGX to further finance the Berbice deep-water port project and other budgeted costs.

 

According to the company, 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 enters 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.

 

Interest payable on the principal amount outstanding shall accrue at a rate of 9.7 per cent per annum payable monthly in cash, with interest on overdue interest. If the loan is extended by Frontera past the agreed date, the new interest rate will be 15 per cent per annum. The loan will be secured by all the assets of CGX.

 

Orlando Cabrales, CEO of Frontera, said: “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.

 

Completing the loan agreement with CGX is an important step forward and the JV remains firmly on track to spud its first offshore Guyana well as planned in the second half of this year“.

 

Suresh Narine, executive co-chairman of CGX, added: “These are exciting times for CGX, the JV, and our stakeholders as we get closer to spudding Kawa-1.

 

We have exciting exploration plans for the Kawa-1 and Makarapan-1 wells on the Corentyne and Demerara Blocks and we are developing the infrastructure necessary to support and enhance broader energy and trade industry activity through the Berbice deep-water port project“.

 

Subject to the approval of the TSX Venture Exchange, Frontera 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 US$0.712.

 

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 per cent of the currently issued and outstanding common shares of CGX.

 

The loan is subject to the negotiation and execution of definitive agreements between Frontera and CGX and obtaining regulatory approvals. Frontera stated that there was no guarantee that definitive agreements would be executed.

 

As for the drilling of Kawa-1, the JV announced in February that it would drill the well in the second half of 2021.

 

It is worth reminding that the JV in November 2020 concluded collaborative discussions with the Government of Guyana concerning the rescheduling of the work commitments on the block.

 

As a result, the previous 27 November 2020 deadline for drilling of the next well on the Corentyne block was extended to 27 November 2021.

 

In early March, CGX Energy revealed budget details for the exploration drilling campaign involving the Kawa-1 and Makarapan-1 wells offshore Guyana.

 

Source: Offshore Energy Today