Frontera Energy Corporation and CGX Energy Inc., joint venture partners in Petroleum Prospecting Licenses for the Corentyne and Demerara blocks offshore Guyana, on Friday announced that they have entered into a term sheet for a US$19 million loan that will enable CGX to continue to finance its share of costs related to the oil blocks, the Berbice Deepwater Port, and other budgeted costs as agreed to by Frontera.
“Our joint venture with CGX represents a significant growth opportunity for both companies and is rooted in a commitment to the Guyanese government to develop these world class assets with a focus on local engagement and the development of infrastructure. Completing the loan agreement with CGX is an important step forward and the Joint Venture remains firmly on-track to spud its first offshore Guyana well as planned in the second half of this year,” Chief Executive Officer of Frontera Orlando Cabrales was quoted as saying in a statement issued by Frontera.
Additionally, Professor Suresh Narine, Executive Co-Chairman of CGX, stated that it is exciting times for the Joint Venture and other stakeholders as they get closer to spudding the Kawa-1 well. “We have exciting exploration plans for the Kawa-1 and Makarapan-1 wells on the Corentyne and Demerara Blocks and, as importantly, we are developing the infrastructure necessary to support and enhance broader energy and trade industry activity through the Berbice Deepwater Port Project. We look forward to executing on our programs and creating value and opportunity for our stakeholders,” he added.
According to the statement issued by Frontera, the loan to CGX will be available for drawdown in tranches on a non-revolving basis until the earlier of October 31, 2021 or the date on which CGX or its subsidiaries enters into a binding transaction that provides funds to repay the amounts outstanding under the loan.
It was further stated that the loan, together with all interest accrued, shall be due and payable on June 30, 2022, or such later date as determined by Frontera, at its sole discretion. Interest payable on the principal amount outstanding shall accrue at a rate of 9.7% per annum payable monthly in cash, with interest on overdue interest. Additionally, if the loan is extended by Frontera past June 30, 2022, at its sole discretion, the new interest rate will be 15% per annum. The loan will be secured by all the assets of CGX. The loan agreement also includes a standby fee of 2% multiplied by the daily average amount of unused commitment under the Loan payable quarterly in arrears by CGX during the drawdown period.
CGX Energy Inc recently announced that approximately US$90 million would be spent on its Guyana exploration programme in 2021. The company said that the Kawa-1 exploration well on the Corentyne block is currently expected to be drilled to a depth of approximately 6,500 metres. It said that the well is expected to be spudded in the second half of 2021.
Frontera holds a direct working interest of 33.3% in both the offshore Corentyne and Demerara blocks, and together with CGX, shares ownership of 73.8%, resulting in a total consolidated working interest of 82.6% in the blocks. The two companies have identified a total of 32 drill prospects in the offshore Corentyne and Demerara blocks.
