CGX Energy agrees to settle all liabilities with Japan Drilling

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CGX Energy Inc. announced on Wednesday that it has entered into an agreement with Japan Drilling Co., Ltd. along with its subsidiary CGX Resources Inc., to settle all liabilities claimed by JDC from the Company arising from a drilling contract and subsequent settlement arrangements between the parties.

The agreement with JDC is one step in a series of transactions that CGX Energy is seeking to undertake in order to restructure its liabilities and provide for sufficient working capital to enable CGX Energy to give effect to its business plan.

Under the terms of the agreement, the Company is proposing to pay JDC 45% of the principal amount of the funds claimed (or US$6,637,536.80), together with interest accrued on such reduced amount in the sum of US$1,266,500.08 (or US$7,904,036.88 in the aggregate), in order to fully satisfy all liabilities. The completion of this transaction is conditional on CGX Energy successfully completing a financing, which condition may be waived by the Company. The agreement between JDC and the Company will terminate if the closing of the transaction is not completed on or before March 31, 2019. The failure to complete this transaction will result in any liabilities owed to JDC remaining outstanding which liabilities would continue to incur interest.

To the knowledge of the Company, JDC owns 14,752,764 CGX Energy common shares (or approximately 13.36% of the outstanding CGX Energy shares). As a result, the transaction is considered to be a related party transaction under Multilateral Instrument 61-101 which absent exemptions would obligate CGX Energy to obtain a formal valuation and obtain approval from a minority of the CGX Energy shareholders. CGX Energy is exempted from the formal valuation requirement pursuant to section 5.5(b) of MI 61-101 and from the minority approval requirement pursuant to section 5.7(1)(c) of MI 61-101 on the basis that JDC beneficially owns voting securities of CGX Energy that carry fewer voting rights than Frontera Energy Corp. who, in the circumstances of the transaction, is not an interested party, is arm’s length to JDC and supports the transaction.

CGX Energy Inc has successfully renegotiated its work commitments for the Demerara, Corentyne and Berbice Petroleum Prospecting Licenses with the Government of Guyana. As part of the renegotiation, the Company has also agreed to relinquish 25% of the acreage of both the Corentyne and Demerara blocks to the Government of Guyana.

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