Georgetown: CGX Energy Inc. announces today that it has entered into an agreement with GMP Securities L.P. in connection with a proposed private placement of a minimum of Cdn$35,000,000 (the "Minimum Offering") and a maximum of Cdn$40,000,000 of units of CGX (the "Units") at a price of Cdn$0.14 per Unit.
Each Unit will consist of one common share and one common share purchase warrant of the Company (a "Warrant"), each Warrant being exercisable to acquire one CGX common share at an exercise price of Cdn$0.20 per share for a period of five years following the date of issuance of the Units. All common shares that comprise the Units and any common shares issued on exercise of the Warrants will be subject to a four month hold period from the date of issuance of the Units. The private placement is subject to approval of the TSX Venture Exchange ("TSXV") and other customary closing conditions.
The Company also announces that it has entered into a binding term sheet with Pacific Rubiales Energy Corp. ("Pacific Rubiales"), a current shareholder of the Company, dated February 27, 2013 (the "Pacific Rubiales Agreement") pursuant to which Pacific Rubiales has agreed to purchase all of the Units to be issued in the Minimum Offering that are not subscribed for by other investors. Pursuant to the Pacific Rubiales Agreement, it is a condition of closing of the placement of the Minimum Offering to Pacific Rubiales that the Company renegotiate certain of its agreements with the officers, directors, employees and consultants of the Company such that the aggregate obligations payable by the Company or any of its subsidiaries under such agreements on a change of control of the Company do not exceed Cdn$4,000,000.
The net proceeds from the private placement, after payment of an advisory fee to GMP, the expenses of GMP relating to its engagement by CGX and other transaction expenses, will be used by CGX as follows: as to approximately US$15,000,000, to meet the Company's current default payment obligations owing to Repsol Exploración S.A. ("Repsol"), Tullow Guyana B.V. and YPF S.A. (collectively the "Partners") pursuant to the Joint Operating Agreement among the Partners to the Georgetown Petroleum Agreement ("Georgetown PA"), as to a maximum of Cdn$4,000,000, for change of control payments to officers, directors, employees and consultants of the Company who will no longer be with the Company following closing, in satisfaction of a transaction fee payable to the Company's financial advisor, and as to the balance of the net proceeds of the private placement, to fund expenditures related to the Company's oil and gas exploration activities and for general corporate purposes.
Subject to the approval of the TSXV, the Company has agreed to pay GMP an advisory fee of (i) 4% of the gross proceeds of the private placement in respect of the subscription for Units by Pacific Rubiales, and (ii) 6% of the gross proceeds derived from the sale of Units pursuant to the private placement to any investor(s) other than Pacific Rubiales. The TSXV has advised the Company that it has no objection to the payment of the fee at this time.
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