CGX Energy, Inc. announced that the Company and CGX Resources Inc. have entered into a definitive settlement agreement with Japan Drilling Co., Ltd. with an effective date of November 30, 2015. On June 19, 2014, CGX Resources, a wholly-owned subsidiary of the Company, entered in to: a drilling rig agreement with JDC for the use of JDC's HAKURYU-12 drilling rig. As previously announced, on August 28, 2015, CGX Energy, CGX Resources and JDC entered into a settlement term sheet whereby the parties agreed to terminate the Drilling Agreement and settle amounts owing to JDC in the amount of $20.35 million in exchange for the issuance of 16,522,500 common shares in the capital of CGX Energy and the deferral of the JDC Payable in the amount of $14.85 million.

The parties subsequently entered into the Settlement Agreement in respect of the issuance of the Settlement Shares and the settlement of the JDC Payable. Pursuant to the terms of the Settlement Agreement, the parties agreed that the JDC Payable shall be settled as follows: $500,000 by December 1, 2015; $7.18 million by March 25, 2016; and $7.18 million by June 15, 2016. CGX Energy has paid $100,898.63, representing $100,000 plus accrued and unpaid interest thereon from and including December 1, 2015, in respect of the partial settlement of the First Payment on January 11, 2016 and JDC has agreed to the deferral of the remaining balance of the First Payment (plus accrued and unpaid interest thereon from and including December 1, 2015) which shall be made no later than by March 25, 2016.

The 16,522,500 Settlement Shares were issued to JDC on January 11, 2016 after receiving approval from the TSX Venture Exchange. The Settlement Shares represent $5.5 million of the JDC Payable and were issued at a subscription price of CAD 0.44 per share. The Settlement Shares represent approximately 15% of all issued and outstanding common shares on a non-diluted basis.

The Settlement Shares are subject to a hold period expiring May 12, 2016, representing four months and one day after the date of issuance. As part of the Settlement Agreement, the Company also provided JDC with a parent guarantee in respect of the JDC Payable which shall be reduced upon each applicable repayment of the JDC Payable, including the issuance of the Settlement Shares.