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CGX Energy Inc V.OYL

Alternate Symbol(s):  CGXEF

CGX Energy Inc. is a Canada-based oil and gas exploration company. It is focused on the exploration of oil in the Guyana-Suriname Basin and the development of a deep-water port in Berbice, Guyana. The Company, through one of its subsidiaries, holds an interest in a Petroleum Prospecting Licence (PPL) and related Petroleum Agreement (PA) on the Corentyne block in the Guyana Basin, offshore Guyana. The Company, through its subsidiary Grand Canal Industrial Estates, is constructing the Berbice Deep Water Port. This facility, located on the eastern bank of the Berbice River, adjacent to and north of Crab Island in Region 6, Guyana, is being constructed on 30 acres with 400 m of river frontage. Its subsidiaries include CGX Resources Inc., GCIE Holdings Limited and CGX Energy Management Corp. It is the operator of the Corentyne block and holds a 27.48% working interest. Its Wei-1 exploration well is located west of the Kawa-1 discovery in the northern region of the Corentyne block.


TSXV:OYL - Post by User

Comment by Beaner1814on Mar 12, 2022 8:33pm
324 Views
Post# 34509557

RE:RE:RE:RE:News

RE:RE:RE:RE:News

First question: without more (ie the express terms of the Agreement), unlikely given the release. Remember within the offering and then confirmed in the more recent audit, FEC more than likely has included another no-dilution clause which may operate in a very similar way to the repayment of the bridge loan under the offering (ie the Agreement states that they will pay 3.10 per share but if CGX was to unilaterally convert the debt that 3.10 turns in to a substantially reduced number to avoid any dilution to FEC's shareholding.

Second question: the loan being "secured" by assets is common and in the most general of descriptions only allows for the security holder (FEC) to claim amounts owing against those assets in the event that CGX is wound up. Given the relevant state CGX finds itself (and confirmed in the latest financial audit) were FEC not to have secured the loan, then they would have been at the back of the line (but just ahead of us) as an unsecured borrower in any administrative proceedings. It would be my understanding that any other outcome (ie FEC taking all assets, including the leases) would be FEC being unjustly enriched where the value of the assets exceeded the amount owing.

third question: all depends on whether it makes economic sense for FEC, but unlikely. Collecting the interest may make sense if FEC's business was only on borrowing capital and not running an O&G enterprise, but the ongoing debt would make CGX less attractive as an investment to additional suitors and would only make sense if FEC was looking to push CGX to be wound up (which as FEC's "subsidiary" would look like they don't know how to properly manage their affairs equalling less trust from their stakeholders including the Guyana Government). Converting the debt to shares would allow CGX to capitalize on a potential farm down following the deadline, especially if that $3.10/share magically turns into <$1.00/share where there is a stipulation of no-dilution within the loan agreement.

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