With the drilling costs for the Wei-1 well on the Corentyne Block jumping from the initial US$160 million estimate to a range of US$175 million – US$190 million, shareholders for Frontera Energy Corporation have expressed concern about the capacity of CGX Energy to foot its share of the bills.
This apprehension was brought to the fore during the 2023 first-quarter earnings call for Frontera. Specifically, Roman Rossi with Canaccord Genuity highlighted that if one peruses the financial statements for CGX, “it seems they don’t have enough cash to fund their share” of the climbing costs. On this premise, Rossi questioned if Frontera is considering providing any type of financial support for its partner.
Frontera’s Chief Executive Officer (CEO), Orlando Cabrales said his company cannot comment on CGX plans. “As we said, I mean, the joint venture remains committed to completing the well… But it’s difficult for us to make any comment on CGX’s plans.”
He also explained that the increase in cost for Wei-1 includes the delays associated with the late arrival of the rig and costs associated with fishing and sidetrack operations.
To date, Cabrales said the well located approximately 14 kilometers northwest of the Kawa-1 light oil and condensate discovery, has been successfully drilled to a depth of 19,142 feet. He said the partners anticipate reaching a total depth of 20,500 feet within the original 4-5 month timeframe, as announced on January 23, 2023.
Plagued by years of financial difficulties, CGX has been hard-pressed to relinquish not only the Demerara and the Berbice blocks but even controlling interest in the Corentyne Block to Frontera. CGX’s stake in the Corentyne block has reduced to 32% while Frontera Energy owns 68%.
With its current stake, CGX will have to find approximately US$11 to US$15 million, according to its latest financial report. That document also notes that CGX is currently assessing strategies to fulfill this obligation.
As of March 31, 2023, the report states that CGX had accumulated a deficit of US$320,817,166. It also notes that the company currently has no revenues, as such, its ability to ensure continuing operations relates to its aptitude to obtain the financing necessary to complete the exploration and development of oil and gas concessions and the completion of its Berbice Deep Water Port project.
