CGX Provides Update on Financial Position and Announces Private Placement Financing

CGX Provides Update on Financial Position and Announces Private Placement 
Financing 
/NOT FOR DISSEMINATION IN THE UNITED STATES OR THROUGH U.S. NEWSWIRE SERVICES/ 
(TSX-V | OYL) 
TORONTO, Feb. 27, 2013 /CNW/ - CGX Energy Inc. (TSX-V - OYL) ("CGX" or the 
"Company") announces that it has entered into an agreement with GMP Securities 
L.P. ("GMP") dated February 27, 2013 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.

Pacific Rubiales currently owns 144,434,285 common shares representing 35.06% 
of the Company's issued and outstanding common shares and is an insider of the 
Company. Assuming Pacific Rubiales subscribes for all of the Units pursuant to 
the Minimum Offering and that no other Units are sold pursuant to the private 
placement, Pacific Rubiales will hold 60% of the Company's issued and 
outstanding common shares (and approximately 70% assuming the exercise of all 
of the Warrants issued to Pacific Rubiales). Pacific Rubiales also holds 
warrants which are exercisable for an additional 42,857,142 common shares of 
the Company at an exercise price of Cdn$0.60 per common share until January 9, 
2014. As a result, the private placement is a related party transaction 
pursuant to Policy 5.9 of the TSXV and Multilateral Instrument 61-101 - 
Protection of Minority Security Holders in Special Transactions ("MI 61-101") 
and triggers the requirement for a valuation and minority approval unless 
exemptions therefrom are available. As CGX is not listed on or quoted on any 
prescribed exchange listed in MI 61-101, the transaction is exempt from the 
formal valuation requirement contained in MI 61-101 pursuant to section 5.5(b) 
of MI 61-101. CGX is relying on the financial hardship exemption from the 
minority approval requirement of MI 61-101 contained in section 5.7(e) of MI 
61-101 as described in more detail below.

In its Management's Discussion and Analysis for the nine months ended 
September 30, 2012, the Company disclosed that as of November 26, 2012, the 
Company had received a default notice in respect of its Participating Share of 
joint account expenses for the Georgetown PA in the amount of US$11,500,000. 
On January 24, 2013, the Company was advised by Repsol as operator of the 
Georgetown PA that the total default amount had increased to US$14,939,626. 
The Company has negotiated a stay of any enforcement proceedings until March 
22, 2013. The Company reports that the current default amount is 
significantly in excess of its cash on hand and, accordingly, the Company 
currently has insufficient funds to satisfy this obligation and other near 
term obligations.

Pursuant to MI 61-101, minority approval is not required for a related party 
transaction in the event of financial hardship in specified circumstances. A 
special committee (the "Special Committee") of four "independent directors" of 
the Company, as defined in MI 61-101, was constituted to consider the proposed 
private placement and Pacific Rubiales investment. The Special Committee 
(other than John Cullen and Dennis Pieters who each refrained from voting on 
the transaction after being designated as a continuing director by Pacific 
Rubiales and thereby having a personal interest in the transaction) has 
determined unanimously that the Company is in serious financial difficulty, 
the private placement to Pacific Rubiales is designed to improve the financial 
position of the Company, and the terms of the private placement are reasonable 
in the circumstances of the Company. Following these determinations and a 
recommendation to the Board of Directors, the Board of CGX has made the same 
determination. Accordingly, CGX has satisfied the elements of the financial 
hardship exemption.

The net proceeds from the private placement will enable the Company to 
discharge its immediate obligations under the Georgetown PA Joint Operating 
Agreement and to continue to fund its other near term obligations. The 
Company expects that further financings will be necessary to ensure that it 
can meet its ongoing obligations. The ability of the Company to continue as 
a going concern is dependent on securing the additional required financing, 
either through issuing additional equity, debt instruments and/or payments 
associated with a joint venture farm-out. There can be no assurances that 
the Company will successfully raise additional funds.

Pursuant to the Pacific Rubiales Agreement, upon closing of the private 
placement, the board of directors of CGX will be reconstituted as follows to 
ensure that a majority of the directors are nominees of Pacific Rubiales:
    --  Ronald Pantin
    --  José Francisco Arata
    --  Marino Ostos
    --  Dennis Mills
    --  Jairo Lugo
    --  Suresh Narine
    --  John Cullen
    --  Dennis Pieters

Ronald Pantin is the Chief Executive Officer and Executive Director of Pacific 
Rubiales. Mr. Pantin has worked in the Venezuelan oil industry for 24 years 
prior to founding Pacific Rubiales. Mr. Pantin has held a number of senior 
positions within Petroleos de Venezuela, S.A. ("PDVSA"), most recently being 
President of PDVSA Services. Immediately after PDVSA, Mr. Pantin was President 
of Enron Venezuela. He began his professional career with Maraven, an 
affiliate of PDVSA, where he held a variety of positions including 
Exploration and Production Planning Manager, Petroleum Engineering Manager, 
Treasurer, Operations Manager in the Production Division, and Corporate 
Planning Manager.

José Francisco Arata has been the President and a director of Pacific 
Rubiales since 2008. From August 21, 2006 to January 23, 2008, Mr. Arata was 
the Chief Executive Officer and a director of Pacific Stratus Energy Ltd. From 
July 1997 to February 2006, Mr. Arata was the Executive Vice President and a 
director of Bolivar Gold Corp. Mr. Arata has over 29 years of experience in 
mineral and oil exploration in a number of countries in Latin America. He 
began his professional career with Maraven, an affiliate of PDVSA, where he 
held a variety of positions within the Exploration and Production Department. 
After leaving PDVSA, Mr. Arata started a number of private ventures in the 
Venezuelan mining industry. Mr. Arata became a director of CGX on June 28, 
2012.

Dr. Marino Ostos is Senior Vice President, New Areas for Pacific Rubiales. 
He has over 30 years of experience in Exploration and Production operations 
and management and was one of the founders of Pacific Stratus Ventures, later 
known as Pacific Stratus Energy Ltd. where he served as President and Chief 
Operating Officer. Dr. Ostos holds a Masters and Ph.D. in Geological Sciences 
from Rice University, Houston, Texas as well as a Bachelor in Geosciences and 
a Geological Engineering Degree. Dr. Ostos became a director of CGX on May 30, 
2012.

Dennis Mills is a Canadian businessman and former politician. Mr. Mills was 
Vice Chairman and Chief Executive Officer of MI Developments Inc. from 2004 to 
2011, and a Vice-President at Magna International from 1984 to 1987. Mr. Mills 
served as a Member of Parliament in Canada's federal parliament from 1988 to 
2004. While a Member of Parliament, Mr. Mills was Parliamentary Secretary to 
the Minister of Industry from 1993 to 1996, the Parliamentary Secretary to the 
Minister of Consumer and Corporate Affairs from 1993 to 1995 and the Chair of 
the Committee studying the Industry of Sport in Canada. Mr. Mills was the 
Senior Policy Advisor to the Cabinet Committee on Communications (1980-1984), 
Advisor to the Minister of Energy (1980-1981), Senior Advisor to the Minister 
of Multiculturalism (1980), and Senior Communications Advisor to the Prime 
Minister of Canada, The Right Honourable Pierre Elliott Trudeau (1980-1984).

Dr. Jairo Lugo is Senior Vice President, Exploration of Pacific Rubiales. 
From 2004 to January, 2008, he was the Executive Vice President, Exploration 
of Pacific Stratus Energy. Dr. Lugo was Director of Exploration of Arauca 
Energy Group from April, 2003 to October, 2004, Exploration coordinator for 
PDVSA from 2000-2002, G&G Manager for PDVSA-CVP from 1998-2000, and also held 
various exploration geologist positions at PDVSA from 1990-1998.

Due to the Company's immediate need for financing in order to carry on its 
business and achieve its business objectives, the parties contemplate 
closing the private placement as soon as possible, however not later than 
March 11, 2013 unless otherwise agreed to by Pacific Rubiales, GMP and CGX. 
As such, in the Company's view, it will be necessary for the Company to file 
the material change report with respect to the proposed transaction less than 
21 days before the expected closing date of the private placement.

CGX has been advised by Pacific Rubiales that Pacific Rubiales intends for CGX 
to remain a public company after completion of the financing.

The Units when issued will not be registered under the U.S. Securities Act of 
1933, as amended, and may not be offered or sold in the United States absent 
registration or applicable exemption from the registration requirements.

Dr. Suresh Narine, Executive Director of CGX, stated, "Over the last 15 years, 
CGX has been the most active explorer for hydrocarbons in Guyana. This 
financing led by Pacific Rubiales provides a new base to allow a high level of 
exploration to continue in our newly re-issued Corentyne, Demerara and Berbice 
Licences, with continued participation by the other CGX shareholders. Guyanese 
leadership at the Board level and in management will continue, unique amongst 
companies currently actively exploring in Guyana. Pacific Rubiales will add 
broad global experience, with a very successful track record in exploration."

About CGX Energy

CGX is a Canadian-based oil and gas exploration company focused on the 
exploration of oil in the Guyana-Suriname Basin, an area in which the United 
States Geological Survey estimated a Pmean oil resource potential of 13.6 
billion barrels in their Assessment of Undiscovered Conventional Oil and Gas 
Resources of South America and the Caribbean, 2012. CGX is managed by a team 
of experienced oil and gas and finance professionals from Guyana, Canada, the 
United States and the United Kingdom.

About Pacific Rubiales

Pacific Rubiales is a Canadian company and producer of natural gas and crude 
oil, owns 100% of MetaPetroleum Corp., which operates the Rubiales, Piriri and 
Quifa heavy oil fields in the Llanos Basin, and 100% of Pacific Stratus Energy 
Colombia Corp., which operates the La Creciente natural gas field in the 
northwestern area of Colombia. Pacific Rubiales has also acquired 100% of 
PetroMagdalena Energy Corp., which owns light oil assets in Colombia, and 100% 
of C&C Energia Ltd., which owns light oil assets in the Llanos Basin. In 
addition, the Company has a diversified portfolio of assets beyond Colombia, 
which includes producing and exploration assets in Peru, Guatemala, Brazil, 
Guyana and Papua New Guinea. Pacific Rubiales common shares trade on the 
Toronto Stock Exchange and La Bolsa de Valores de Colombia and as Brazilian 
Depositary Receipts on Brazil's Bolsa de Valores Mercadorias e Futuros under 
the ticker symbols PRE, PREC, and PREB, respectively.


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. 
Forward-Looking Statements: 
This press release contains forward-looking statements. More particularly, 
this press release contains statements that include, but are not limited to, 
the timing of the private placement, the anticipated use of proceeds, the 
proposed changes to the Board of Directors and management of CGX and the 
receipt of required stock exchange approvals. 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. The forward-looking statements are 
based on certain key expectations and assumptions made by CGX. Although CGX 
believes that the expectations and assumptions on which the forward-looking 
statements are based are reasonable, undue reliance should not be placed on 
the forward-looking statements because CGX can give no assurance that 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 to other risks 
that may affect the forward-looking statements in this press release and those 
set out in CGX's management discussion and analysis of the financial 
condition and results of operations for the three and nine month periods ended 
September 30, 2012, the closing of the private placement could be delayed if 
CGX is not able to obtain the necessary stock exchange approval on the 
timelines it has planned and the private placement will not be completed at 
all if this approval are not obtained or some other condition to the closing 
is not satisfied. Accordingly, there is a risk that the private placement will 
not be completed within the anticipated time or at all. The forward-looking 
statements contained in this press release are made as of the date hereof 
and CGX 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. 
Kerry Sully, President and CEO (604) 733-9647 orksully@cgxenergy.com  
Charlotte May, Communications Manager (416) 364-3353 orcmay@cgxenergy.com     
SOURCE: CGX Energy Inc. 
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CO: CGX Energy Inc.
ST: Ontario
NI: PVT LOAN MNA  
-0- Feb/27/2013 19:54 GMT
 
 
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