On April 26, 2013, the Company (PRE) purchased 350,000,000 units of CGX, a Canadian-based oil and gas exploration company focused on the exploration for oil in the Guyana/Suriname Basin, for an aggregate price of $35 million pursuant to a private placement financing. Each unit consisted of one common share plus one common share warrant of CGX with an exercise price of $0.17. As a result of this investment, the Company (PRE) held 49,443,428 common shares of CGX, representing approximately 64.4% of the issued and outstanding common shares of CGX on a non-diluted basis.
- As at December 31, 2016, the Company held 50,351,929 common shares of CGX, representing approximately 45.61% of the issued and outstanding common shares of CGX on a non-diluted basis. CGX has an interest in three petroleum prospecting licences in the Guyana-Suriname Basin (two offshore blocks, Corentyne & Demerara, and one onshore block, Berbice) spanning approximately 13,500 km² in a large highly prolific frontier basin with important resource potential.
December 7, 2018 - The Company entered into an amendment to the Frontera Loans, whereby the maturity dates of the Frontera Loans were extended from October 31, 2018 to March 31, 2019. December 14, 2018 - The Company entered into an amended letter agreement with Frontera to enter into a debt settlement transaction and amend the convertible amount under a bridge loan facility. CGX and Frontera entered into a debt settlement agreement with respect to the settlement of US$1.2 million of debt owing to Frontera by CGX through the issuance of 5,714,285 Common Shares at a deemed price of US$0.21 (or C$0.2775) per Common Share (the “Debt Settlement”). The settlement of debt was considered a “related party transaction” under MI 61-101, but was exempt from the formal valuation and minority shareholder approval requirements of MI 61-101 as the fair market value of the transaction was less than 2.5% of the Corporation’s market capitalization.
December 7, 2018 - The Company entered into a binding Letter of Intent with Frontera to enable among other things Frontera and CRI to enter into a JOA covering CGX’s two offshore Petroleum Prospecting Licenses in Guyana - the Corentyne and Demerara Blocks. Under the Letter of Intent, Frontera acquired a 33.333% working interest in the two 7 Blocks in exchange for a US$33.3 million signing bonus. Frontera agreed to pay one-third of the applicable costs plus an additional 8.333% of CGX’s direct drilling costs for the initial exploratory commitment well on the two blocks. CGX remained the operator of both Blocks.
December 14, 2018 - The Company entered into an amended letter agreement with Frontera to enter into a debt settlement transaction and amend the convertible amount under a bridge loan facility. CGX and Frontera entered into a debt settlement agreement with respect to the settlement of US$1.2 million of debt owing to Frontera by CGX through the issuance of 5,714,285 Common Shares at a deemed price of US$0.21 (or C$0.2775) per Common Share (the “Debt Settlement”). The settlement of debt was considered a “related party transaction” under MI 61-101, but was exempt from the formal valuation and minority shareholder approval requirements of MI 61-101 as the fair market value of the transaction was less than 2.5% of the Corporation’s market capitalization.
On September 25, 2019, the Company announced that it had elected to convert the principal amount outstanding ($8.8 million) under its bridge loan to CGX due September 30, 2019 (“Bridge Loan”) into shares of CGX at a price of $0.22 per share. As a result of the conversion, Frontera acquired an additional 40,000,000 common shares of CGX. Following the conversion of the Bridge Loan, Frontera owned 197,383,129 common shares of CGX
(representing approximately 72.51% on a non-diluted basis)
On March 14, 2019, the Company announced that it acquired 101,316,916 additional common shares of CGX pursuant to a rights offering for an aggregate purchase price of C$25 million (or C$0.25 per common share). Also, as consideration for providing a standby commitment in connection with the rights offering, the Company received 15,009,026 5-year warrants to purchase up to 15,009,026 common shares at an exercise price equal to C$0.415 per common shares (the “CGX Warrants”). The Company subsequently exercised the CGX Warrants on December 29, 2020.
On January 31, 2019, the Company entered in to a farm-in joint venture agreement with CGX Energy Inc. (“CGX”), subject to government approval, relating to two shallow water offshore Petroleum Prospecting Licenses in Guyana, the Corentyne and Demerara Blocks. Upon approval, the Company will acquire a 33.333% working interest in the two blocks in exchange for a $33.3 million transfer bonus
On January 31, 2019, the Company and CGX entered into a farm-in agreement covering CGX’s two offshore petroleum prospecting licences in Guyana which was subsequently approved and formalized by the government of the Cooperative Republic of Guyana on May 20, 2019. Concurrent with the signing of the farm-in agreement, the Company entered into a standby commitment agreement with CGX whereby it agreed to back-stop the equity rights offering launched by CGX on February 1, 2019. See “Description of the Business - Upstream Activities - Exploration and Production Agreements - Guyana.”
On May 28, 2021, in pursuant to a term sheet dated Aphril 16, 2021, CGX entered into a US$19 million secured convertible bridge loan agreement (the “Convertible Loan”) to cover certain budgeted costs as agreed to by Frontera. The Convertible Loan is a non-revolving term facility available to be drawdown in tranches until October 31, 2021 with a standby fee of 2% per annum on the daily average amount of unused commitment under the Convertible Loan and accrues interest at a rate of 9.7% per annum on principle outstanding, until maturity on June 30, 2022, or such later date as determined by Frontera, at its sole discretion. Frontera in its sole discretion, may elect to convert all or a portion of the principal amount of the Convertible Loan outstanding into common shares of the Company at a conversion price per common share equal to U.S. $0.712 (being the U.S. dollar equivalent of C$0.89), in certain circumstances.
On September 24, 2021, CGX entered into a term sheet with Frontera, the majority shareholder of CGX and joint venture partner in the Petroleum Prospecting Licenses for the Corentyne and Demerara blocks offshore Guyana (the “Joint Venture”), for a US$20 million rights offering bridge loan (the “Rights Offering Bridge Loan”) that will enable CGX to continue to fund its share of costs related to the Corentyne, Demerara and Berbice blocks, the Berbice Deepwater Port Project (“BDWP”), and other budgeted costs as agreed to by Frontera. On October 8, 2021, the US$20 million Rights Offering Bridge Loan from Frontera to the Company was executed and made available for drawdown in tranches on a non-revolving basis until October 31, 2021. The Rights Offering Bridge Loan, together with all interest accrued was due and payable on October 31, 2021 (the “Maturity Date”) or such later date as determined by Frontera, at its sole discretion; however, the Company and Frontera agreed that the acquisition cost of any securities acquired by Frontera pursuant to the exercise of Rights under the Rights Offering would be satisfied by the reduction of the amounts payable to Frontera under the Rights Offering Bridge Loan. Interest payable on the principal amount outstanding accrued at a rate of 9.7% per annum payable monthly in cash, with interest on overdue interest. If the Maturity Date was extended by Frontera, at its sole discretion, the new interest rate would have been 15% per annum. The loan was fully drawn on October 25, 2021 and subsequently repaid on October 28, upon closing of the Offering.
On October 28, 2021, the Company completed a rights offering (the “Offering”). Pursuant to the Offering, the Company issued to holders of its outstanding common shares of record as at the close of business on October 1, 2021 an aggregate of 45,151,338 transferable rights (each, a “Right”). Each Right entitled the holder thereof to subscribe for one common share upon payment of the subscription price of C$1.63 (equivalent of approximately $1.32) per common share until October 28, 2021.
The Company issued 45,151,338 common shares, the maximum number of common shares available for issuance under the terms of the Offering, based on shareholders’ exercise of the basic subscription privilege and the additional subscription privilege, allocated pro-rata, for aggregate gross proceeds to the Company of C$73,596,681 (equivalent of approximately $59,598,592). Frontera Energy Corporation (“Frontera”) provided a standby commitment in connection with the Offering (the “Standby Commitment”), in which Frontera would acquire any common shares available as a result of any unexercised Rights under the Rights Offering, such that CGX was guaranteed to issue 45,151,338 common shares in connection with the Offering.
In consideration for the Standby Commitment, Frontera received 5-year warrants to purchase up to 1,173,774 Common shares at an exercise price equal to $1.51 per Common Share. Frontera acquired an additional 11,737,747 shares under the Standby Commitment. Frontera acquired an aggregate of 45,083,314 common shares in connection with the Offering pursuant to the exercise of Rights and the Standby Commitment under the Offering for cash consideration of C$ 73,758,802 (equivalent of approximately $ 59,508,802). As of November 1, 2021, Frontera now owns an aggregate of 257,475,49 common shares on a non-diluted basis, which represents approximately 76.98% of the issued and outstanding common shares. On September 24, 2021, CGX entered into a term sheet with Frontera, the majority shareholder of CGX and joint venture partner in the Petroleum Prospecting Licenses for the Corentyne and Demerara blocks offshore Guyana (the “Joint Venture”), for a US$20 million rights offering bridge loan (the “Rights Offering Bridge Loan”) that will enable CGX to continue to fund its share of costs related to the Corentyne, Demerara and Berbice blocks, the Berbice Deepwater Port Project (“BDWP”), and other budgeted costs as agreed to by Frontera. On October 8, 2021, the US$20 million Rights Offering Bridge Loan from Frontera to the Company was executed and made available for drawdown in tranches on a non-revolving basis until October 31, 2021. The Rights Offering Bridge Loan, together with all interest accrued was due and payable on October 31, 2021 (the “Maturity Date”) or such later date as determined by Frontera, at its sole discretion; however, the Company and Frontera agreed that the acquisition cost of any securities acquired by Frontera pursuant to the exercise of Rights under the Rights Offering would be satisfied by the reduction of the amounts payable to Frontera under the Rights Offering Bridge Loan. Interest payable on the principal amount outstanding accrued at a rate of 9.7% per annum payable monthly in cash, with interest on overdue interest. If the Maturity Date was extended by Frontera, at its sole discretion, the new interest rate would have been 15% per annum. The loan was fully drawn on October 25, 2021 and subsequently repaid on October 28, upon closing of the Offering.