CGX Energy Inc. has provided details on the financial state of the company and its plans to restart oil exploration offshore Guyana. The Canadian-based oil junior released its audited consolidated financial results for 2016 along with an update on management’s discussion and analysis of the company’s future plans, on Monday.
Following a disclosure by its Chairman, Dr. Suresh Narine on March 28, 2017 that CGX was “back in the game”; the company has now outlined details of what that journey entails. An enthusiastic Dr. Narine had made the disclosure during a presentation at the Guyana Oil and Gas Association’s (GOGA) inaugural Oil & Gas Conference.
OilNOW reached out to Dr. Narine on Monday with questions pertaining to the financial health of the company and its major shareholder; Pacific Exploration and Production Corporation. Queries were made on whether CGX had already secured the requisite permits from Guyana authorities to re-commence exploration. He had stated during his presentation at the GOGA conference that, “This is an extremely healthy company and suddenly CGX is back in the game.”
In the statement released by CGX on the same day OilNOW made the queries, Dr. Narine said while the global downturn in petroleum prices has significantly affected the company over the past two years, the de-risking of the Guyana basin through multiple large discoveries has simultaneously provided enough buoyancy to allow the company to take steps to restructure its debt and prepare to continue exploration.
The company has been aided significantly in this regard through the support of its major shareholder, Pacific Exploration & Production Corporation, which was successfully restructured after being also affected by the downturn in prices, he pointed out. “The next several months are important ones for the company as we restructure and begin preparing to play our role in the further exploration of the Guyana basin. I wish to thank the Ministry of Natural Resources and the Guyana Geology and Mines Commission for their cooperation and collaboration, especially over the past 12 months,” he said.
See details of CGX’s audited consolidated financial results for 2016, below;
2016 Year-End Overview and Highlights
On April 26, 2017, the Company entered into a bridge loan agreement (the “Bridge Loan III”) with Pacific Exploration & Production Corp. (“Pacific”) in the aggregate principal amount of up to $3,100,000. The Bridge Loan is a non-revolving term facility. The Bridge Loan III accrues interest at an annual rate of 5% per annum and is repayable in full including all accrued interest in April 2018. The Company may draw all or part of the Bridge Loan III in one or more advances to be made on a date or dates agreed to by both parties. Pacific has the right to take a pledge of shares of CGX’s subsidiaries in an event of default under the Bridge Loan III. As of April 28, 2017, the Company had drawn down approximately $1,410,000 on the Bridge Loan III.
On October 13, 2016, the Company entered into a bridge loan agreement (the “Bridge Loan II”) with Pacific in the aggregate principal amount of up to $2 million. This facility was used to help CGX fund monthly general and administrative expenses and was a drawdown facility that was approved by Pacific on a monthly basis. The Bridge Loan II accrues interest at an annual rate of 5% per annum and is repayable in full including all accrued interest in October 2017. Pacific has the right to take a pledge of shares of CGX’s subsidiaries in an event of default under the Bridge Loan II. As of April 28, 2017, the Company had fully drawn on the Bridge Loan II.
On March 4, 2016, CGX entered into a bridge loan facility (the “Bridge Loan I”) with Pacific in an amount up to $2 million. This facility was used to help CGX fund monthly general and administrative expenses and was a drawdown facility that was approved by Pacific on a monthly basis. The Bridge Loan I accrues interest at an annual rate of 5% per annum and is repayable in full including all accrued interest in March 2017. Pacific has the right to take a pledge of shares of CGX’s subsidiaries in an event of default under the Bridge Loan I. The Company had fully drawn on the Bridge Loan I.
On November 16, 2015, Company agreed to issue a convertible debenture (the “Convertible Debenture”) by private placement in the amount of $1.5 million to Pacific. The Convertible Debenture has a term of twelve months and an annual interest payable of 5% and was convertible at the option of the holder at a conversion price of C$0.335. The Convertible Debenture has been funded in full. Pacific has the right to take a pledge of shares in the Company’s subsidiaries in an event of default under the Convertible Debenture.
Pursuant to the terms of the Petroleum Prospecting Licences (“PPL”) governing the Corentyne Block, the Company is currently negotiating the terms of an extension of the spud date for its next exploration well on the block. The previous spud date was July 1, 2016. The Company is also currently negotiating extensions on its commitments of its Demerara and Berbice PPLs.
The Company continues to negotiate with its trade creditors, including with respect to the approximately $14.4 million owed to Japan Drilling Co., Ltd. (excluding interest), approximately $9.5 million owed to Prospector PTE. Ltd. (excluding interest), and the approximately $2.9 million owed to Teikoku Oil (Suriname) Co., Ltd. (excluding interest), with a view to determining how to address these significant payables in light of depressed oil prices. For further information regarding these payables, please see the Company’s financial statements.
Executive Appointment and Option Grant
CGX Energy also announces that on April 14, 2017 its Board of Directors appointed Professor Suresh Narine, as its Executive Director, Guyana, subject to regulatory approval. Professor Narine will remain as a director of the Company. In conjunction with his appointment, the Board of Directors has agreed to grant Professor Narine incentive stock options to purchase 1,000,000 common shares of the Company. The stock options will be granted on May 2, 2017 pursuant to the Company’s stock option plan and will be exercisable at a price equal to the closing market price on such date. The options will expire on May 2, 2022.