Government of Guyana confirms Corentyne License remains in full force and effect and good standing

The Joint Venture remains committed to executing its drilling activities in the Corentyne block and the declaration of force majeure is a procedural step which preserves the Joint Venture's interests in the License

Government of Guyana confirms Corentyne license remains in full force and effect and good standing. (Credit: D Thory from Pixabay)

CGX Energy Inc. (TSXV: OYL) (“CGX”) and Frontera Energy Corporation (TSX: FEC) (“Frontera”), joint venture partners (the “Joint Venture”) in the Petroleum Prospecting License for the Corentyne block offshore Guyana (the “License”), announce today that, further to its announcement on November 28, 2022, due to circumstances beyond the reasonable control of the Joint Venture related to ongoing exploration activities by a third-party operator that have delayed the release of the NobleCorp Discoverer drilling unit contracted by CGX, the Government of Guyana has agreed with the Joint Venture’s declaration of force majeure regarding Phase Two of the Second Renewal Period of the Corentyne Block Petroleum Agreement (“Petroleum Agreement”) and a corresponding extension of the License to January 31, 2023.

The Joint Venture remains committed to executing its drilling activities in the Corentyne block and the declaration of force majeure is a procedural step which preserves the Joint Venture’s interests in the License. The Government of Guyana has confirmed that the Petroleum Agreement for the Corentyne block and License will remain in full force and effect and good standing.

The Joint Venture also announces that it has completed the previously announced agreement to amend the Joint Operating Agreement originally signed between CGX and a subsidiary of Frontera on January 30, 2019, as amended (the “JOA Amendment”). All conditions precedent to the JOA Amendment have been satisfied. As a result of the JOA Amendment, CGX has a 32.00% participating interest and Frontera has a 68.00% participating interest in the Corentyne block, pending the filing of customary documentation with the Government of Guyana. Please see below for more information.

Professor Suresh Narine, Executive Co-Chairman of CGX’s Board of Directors, commented:

“The Joint Venture is well-prepared and excited to begin Wei-1 well drilling operations, scheduled to spud in January 2023. All pre-drill activities are complete and all necessary services, materials and support vessels are contracted. Declaring force majeure is a necessary step in preserving the Joint Venture’s interests in the Corentyne license. We are grateful for the ongoing support and understanding we have received from the Government of Guyana as we mutually work to unlock the potentially transformational opportunity before us in the Corentyne block. With the JOA Amendment now concluded, additional funding for the drilling of Wei-1 is secured and CGX has a clean balance sheet with no loans and encumbrances. We now look forward to the drilling of Wei-1 and the potential extension of the Kawa-1 discovery in the northern section of the Corentyne block.”

Orlando Cabrales, Chief Executive Officer of Frontera, commented:

“The Joint Venture continues to operationally and commercially progress its investments in Guyana. Over the last few months, we’ve filed a Notice of Potential Commercial Interest regarding Kawa-1, and we’ve reached agreement with the Government of Guyana that the Wei-1 well will be spudded no later than January 31, 2023, thus ensuring that the Corentyne license remains in full force and effect and good standing. Looking ahead, we are firmly focused on building on the Joint Venture’s recent light oil and condensate discovery at the Kawa-1 well and successfully spudding the Wei-1 well and the tremendous opportunity that is now before us on the Corentyne Block in one of the most exciting exploration areas in the world.”

CGX and Frontera Complete Joint Operating Agreement Amendment
The Joint Venture has completed the JOA Amendment. As a result of the JOA Amendment, CGX has a 32.00% participating interest and Frontera a 68.00% participating interest in the Corentyne block, pending the filing of customary documentation with the Government of Guyana.

As part of the JOA Amendment, pending the filing of customary documentation with the Government of Guyana, CGX transferred 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 well for up to $130 million and up to an additional $29 million of certain Kawa-1 exploration well, Wei-1 pre-drill, and other costs. In addition, CGX assigned 4.94% of its participating interest, pending the filing of customary documentation with the Government of Guyana, in the Corentyne block to Frontera as consideration for the repayment of the outstanding principal amounts under (i) the previously announced US$19 million convertible loan to CGX dated May 28, 2021, as amended (the “2021 Loan”), and (ii) the previously announced US$35 million convertible loan to CGX dated March 10, 2022, as amended (the “2022 Loan”), and a cash payment of US$3.8 million. The 2021 Loan and the 2022 Loan were initially convertible into a maximum of 27,242,877 and 14,462,809 common shares in the capital of CGX (“Common Shares”), respectively. In connection with a previous extension of the 2021 Loan, the conversion into Common Shares feature was deleted (the “Conversion Feature”). As a result of the elimination of (i) the Conversion Feature, and (ii) the conversion rights under the 2022 Loan into additional participating interests in the Corentyne block in accordance with the provisions of the JOA Amendment, Frontera’s holdings of Common Shares decreased from approximately 79.59% (on a partially-diluted basis) to approximately 77.05% (on a partially diluted basis).

Immediately prior to the JOA Amendment, Frontera beneficially owned and/or exercised control or direction over 257,475,469 Common Shares on a non-diluted basis (representing approximately 76.97% of the issued and outstanding Common Shares on a non-diluted basis), and 273,112,052 Common Shares on a partially-diluted basis (representing approximately 77.99% of the issued and outstanding Common Shares on a partially-diluted basis), assuming the conversion of the 2022 Loan. Immediately after the JOA Amendment, Frontera beneficially owns and/or exercises control or direction over 257,475,469 Common Shares on a non-diluted basis (representing approximately 76.97% of the issued and outstanding Common Shares on a non-diluted basis), and 258,649,243 Common Shares on a partially-diluted basis, (representing approximately 77.05% of the issued and outstanding Common Shares on a partially-diluted basis).

Frontera holds Common Shares for investment purposes. Frontera may, from time to time and depending on market and other conditions, acquire additional Common Shares and/or other equity, debt or other securities or instruments of CGX in the open market or otherwise, and reserves the right to dispose of any or all of the securities in the open market or otherwise at any time and from time to time, and to engage in similar transactions with respect to the securities, the whole depending on market conditions, the business and prospects of CGX and other relevant factors.

Source: Company Press Release