CGX strikes $30M deal to meet immediate needs
CGX Energy Inc. announced yesterday that Pacific Rubiales Energy Corporation, another Canadian oil company, has advanced it $30M to meet its immediate financing needs. That follows the previous CGX announcement, on May 7, of the Eagle-1 failure, cost increases on it and the need to raise approximately $20M in the near term.
The initial estimate for the Eagle-1 was $55M but it increased to $71M on May 7 and currently, as final expenses accumulate, the ultimate figure is estimated to be approximately 10 percent higher.
CGX said it was pleased to announce that it has entered into a definitive subscription agreement with Pacific Rubiales, dated May 27, pursuant to which the latter has subscribed for 85,714,285 units, by way of private placement, at a price of $0.35 per unit for an aggregate purchase of $30M.
The private placement is subject to approval of the CGX shareholders and acceptance by the TSX Venture Exchange.
The units are expected to be issued within a week, following the required exchange and shareholder approval.
The proceeds from the transaction will be used to fund expenditures related to the CGX oil and gas exploration activities in the Guyana-Suriname Basin and for general corporate purposes.
CGX and Pacific Rubiales have also concluded an earn-in and technical cooperation agreement, dated May 27, pursuant to which the latter will provide technical assistance in respect of the operations of the former.
Pacific Rubiales will have the right to participate in the CGX’s next commitment well on each of the Corentyne Petroleum Prospecting Licences (PPLs) and the Annex PPL by funding 50 percent of all related costs and, in the case of the latter, by also funding 50 percent of the seismic programme in exchange for a 33 percent interest in the applicable petroleum licence.
Under the terms of the subscription deal, Dr. Marino Ostos Rosales, of Pacific Rubiales, will be appointed to the CGX Board of Directors.
In addition, CGX  has agreed to include Rosales and Mr. José Francisco Arata on management’s slate of nominees for director and to appoint a third individual, nominated by Pacific Rubiales and eligible under the Business Corporations Act (Ontario), to serve on the company’s board on or prior to December 31, 2012.
Experience
CGX said Rosales, a senior vice-president, New Areas for Pacific Rubiales, has more than 30 years experience in energy and petroleum (E&P) operations and management and was one of the founders of Pacific Stratus Ventures, later known as Pacific Stratus Energy, where he served as President and Chief Operating Officer.
Rosales holds a master’s and doctorate in Geological Sciences from Rice University, Houston, Texas, as well as a Bachelor in Geosciences and a Geological Engineering degree.
Chairman of CGX, Dr. Suresh Narine commented: “We are very pleased with the support we have received from Pacific Rubiales, a major shareholder of CGX and we are looking forward to working with Dr. Rosales and Mr. Arata, both highly experienced E&P professionals. This investment underscores Pacific Rubiales’ confidence in the company’s offshore acreage and the exploration programme being undertaken by CGX.”
Pacific Rubiales is a producer of natural gas and heavy crude oil, owns 100 percent of Meta Petroleum Corp., a Colombian oil operator which operates the Rubiales and Piriri oil fields in the Llanos Basin in association with Ecopetrol, S.A., the Colombian national oil company.
CGX Energy is focused on the exploration of oil in the Guyana-Suriname Basin, an area ranked second in the world for oil and gas prospectivity by the United States Geological Service.