CGX Energy Inc. entered into an agreement with returning investor Frontera Energy Corporation for convertible debt for gross proceeds of $35 million on March 10, 2022. The transaction will close in tranches on a non-revolving basis until the earlier of July 31, 2022, or the date on which CGX has drawn down the maximum amount of the loan. The Loan, together with all interest accrued, shall be due and payable July 31, 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. If the Loan is extended by Frontera September 10, 2023, in its sole discretion, the new interest rate will be 15% per annum. Subject to the approval of the TSX Venture Exchange (“TSXV”), Frontera in its sole discretion, on or after July 31, 2022, may elect to convert all or a portion of the principal amount of the Loan outstanding, including accrued interest that has not been repaid, into common shares of CGX at a conversion price equal to $2.42 per common share, provided Frontera provides CGX with 15 business days' notice of such conversion.

CGX has the right to prepay all or any portion of the Loan, including any unpaid interest, on 15 business days' notice to Frontera before July 31, 2022. CGX is also required to repay all of the Loan that is outstanding in the event that without the consent of Frontera, it issues any security that would dilute Frontera's current ownership of CGX, or any of its subsidiaries enters into any transaction the proceeds of which are used by CGX to pay its part of the authorized costs of Wei1. The maximum number of common shares of CGX which may be acquired by Frontera upon the conversion of only the Loan principal is approximately 14.46 million common shares of CGX.

If only the Loan principal was converted, Frontera would hold approximately 77.93% of the currently issued and outstanding common shares of CGX (compared to its current ownership of 76.97%). The Loan remains subject to customary conditions, including obtaining all required regulatory approvals.