(TSX-V | OYL)
TORONTO, Nov. 24, 2015 /CNW/ - CGX Energy Inc. ("CGX Energy" or the "Company") announced today the release of its unaudited consolidated financial results for the quarter ended September 30, 2015, together with its Management Discussion and Analysis ("MD&A"). These documents will be posted on the Company's website at www.cgxenergy.com and SEDAR at www.sedar.com. All values in this news release and the Company's financial disclosures are in U.S.$, unless otherwise stated.
Dewi Jones, Chief Executive Officer of the Company, commented: "While the industry continues to face challenges due to current market conditions, the Company proceeds to evaluate cost cutting initiatives as well as financing options in order to move forward with our commitments."
Third Quarter 2015 Overview and Highlights
- Financial Results – The Company recorded net loss of $22,698,673 or $0.24 a share for the three month period ended September 30, 2015, compared with $1,213,618 or $0.02 a share for the same period in 2014.
- Cost Cutting Initiatives – General and administrative costs increased by $30,822 to $387,838 in the three month period ended September 30, 2015 from $357,106 for the same period in 2014. These costs are consistent with the prior year are a continued result of an overall cost cutting initiative undertaken by the Company in the latter half of 2013 driven by the reduction in non-essential staff and purchases. The Company expects these costs to decrease slightly in the fourth quarter.
- Joint Venture Initiatives – The Company continues to receive significant interest in its acreage offshore and onshore Guyana. Since the announcement of Exxon Mobil's offshore discovery in May, 2015, the Company has seen renewed interest from potential joint venture partners. The Company is actively farming out its onshore and offshore acreage as well as its interest in its wharf project.
- Debenture Financing – On November 16, 2015, Company agreed to issue a convertible debenture (the "Convertible Debenture") by private placement in the amount of $1.5 million (the "Principal Amount") to Pacific Exploration & Production Corp. ("Pacific"). The Convertible Debenture has a term of twelve months and an annual interest payable of 5% and will be convertible at the option of the holder at a conversion price of C$0.335. In the event that the Company fails to satisfy any of its obligations under the Convertible Debenture, Pacific shall have the right to take a pledge of shares in the Company's subsidiaries. The Convertible Debenture closed on November 18, 2015 upon approval from the TSX Venture Exchange ("TSXV").
- Bridge Loan - In October 2014, the Company entered into a bridge loan agreement (the "Bridge Loan") with Pacific in the aggregate principal amount of C$7.5 million. The Bridge Loan is a non-revolving term facility. The Bridge Loan accrues interest at an annual rate of 5% per annum and was repayable in full including all accrued interest in October 2015. Effective October 10, 2015, Pacific provided a one year extension to CGX in respect of the payments due pursuant to the Bridge Loan.
- JDC Settlement – On June 19, 2014, CGX Resources Inc. ("CGX Resources"), a wholly-owned subsidiary of the Company, entered in to: (i) a drilling rig agreement (the "Drilling Agreement") with Japan Drilling Co., Ltd. ("JDC"); and (ii) a rig sharing agreement (the "Rig Sharing Agreement") with JDC, Teikoku Oil (Suriname) Co., Ltd ("INPEX") for the use of JDC's HAKURYU-12 drilling rig (the "Rig"). Upon termination of the Drilling Agreement, the total amount payable to JDC by CGX Resources was $20.5 million (the "JDC Payable").
Pursuant to the terms of a settlement term sheet entered into with JDC dated August 28, 2015, the JDC Payable will be paid as follows: (i) $5.5 million payable in Common Shares; (ii) $500,000 on or before December 1, 2015; (iii) approximately $7.25 million on or before March 25, 2016; and (iv) approximately $7.25 million on or before June 15, 2016. The total amount of the JDC Debt is subject to adjustment based upon the demobilization fees under the Drilling Contract. JDC will be issued 16,522,500 Common Shares (the "JDC Settlement Shares") at a price of C$0.44 per share resulting in JDC owning approximately 15% of the Company on a non-diluted basis. Subject to the approval of the TSXV, the JDC Settlement Shares will be issued in two tranches as follows: (i) 9,292,687 Common Shares to be issued after a definitive settlement agreement is entered into between the Company, CGX Resources and JDC; and (ii) 7,229,813 Common Shares to be issued upon clearance of JDC's Personal Information Form by the TSXV and any other conditions required by the TSXV. The JDC Settlement Agreement also provides for a parent guarantee from CGX to JDC in respect of the JDC Payable. As a result of the much lower prices for rigs currently available, the Company is of the view that notwithstanding the JDC Payable, drilling the next exploration well offshore Guyana on the Corentyne Block will ultimately cost approximately the same as under the Drilling Agreement.
- INPEX - Under the Rig Sharing Agreement and reaffirmed with an accord and satisfaction agreement with INPEX, CGX Resources owes approximately $2.9 million to INPEX for shared costs incurred in the utilization of the Rig. In August of 2015, the Company mischaracterized this as a settlement agreement in the Company's news release dated August 28, 2015. The Rig Sharing Agreement is still in effect between CGX Resources, Teikoku and JDC.
- Corentyne Block – On June 18, 2015, CGX received approval to extend its spud date deadlines on the Corentyne Block. The Government of Guyana granted approval of the extensions effective June 18, 2015 for the spud date on the first commitment well from October 31, 2015 to July 1, 2016 and an extension to the spud date deadline on the second commitment well from November 27, 2016 to November 27, 2017. As a result of the continuing decline in oil prices, the Company obtained a deferral of its commitment well in the Corentyne Block. This well is expected to be spud by the extension date July 1, 2016.
About CGX Energy
CGX Energy is a Canadian-based oil and gas exploration company focused on the exploration of oil in the Guyana-Suriname Basin.
NEITHER THE TSX VENTURE EXCHANGE NOR ITS REGULATION SERVICES PROVIDER (AS THAT TERM IS DEFINED IN THE POLICIES OF THE TSX VENTURE EXCHANGE) ACCEPTS RESPONSIBILITY FOR THE ADEQUACY OR ACCURACY OF THIS RELEASE
This news release contains forward-looking statements. Forward-looking statements are frequently characterized by words such as "plan", "expect", "project", "intend", "believe", anticipate", "estimate", "may", "will", "would", "potential", "proposed" and other similar words, or statements that certain events or conditions "may" or "will" occur in the future. These forward-looking statements are based on certain key expectations and assumptions made by CGX Energy. CGX Energy believes the expectations and assumptions on which it develops forward-looking statements are reasonable; however, undue reliance should not be placed on forward-looking statements as there can be no assurance they will prove to be correct. Since forward-looking statements address future events and conditions, by their very nature they involve inherent risks and uncertainties. Actual results could differ materially from those currently anticipated due to a number of factors and risks. In addition, other risks that may affect the forward-looking statements in this news release are outlined further in the Company's Annual Information Form dated April 29, 2015 filed on SEDAR at www.sedar.com.
The forward-looking statements contained in this news release are made as of the date hereof and CGX Energy undertakes no obligation to update publicly or revise any forward-looking statements or information, whether as a result of new information, future events or otherwise, unless so required by applicable securities laws.
SOURCE CGX Energy Inc.
For further information: Michael Galego, General Counsel and Secretary at (416) 843-3858 or [email protected]