CGX Energy Inc., a Canadian firm in search of oil since the 1990s, is doing everything possible to maintain its presence in Guyana, the hottest exploration destination in the world. After its subsidiary, CGX Resources Inc. relinquished the Demerara and Berbice blocks due to financial constraints, the affiliate also surrendered to Frontera Energy Corporation, most of the working interest in the Corentyne block where drilling at the Wei-1 well is ongoing.
To ensure it is able to meet the Wei-1 costs and other activities in that block, CGX has also sold 76.05 % of its issued and outstanding common shares to Frontera, a May 2023 financial report by CGX said. This means that as of March 31, 2023, Frontera has the voting power to influence the outcome of all corporate transactions for CGX.
Importantly, the financials did not indicate how this 76.05% would be spread across CGX’s subsidiaries which include CGX Resources Inc. registered in the Bahamas, GCIE Holdings Limited registered in Barbados, Grand Canal Industrial Estates Inc. registered in Guyana, CGX Energy Management Corp. registered in the USA, and ON Energy Inc. (in the process of being dissolved) registered in Guyana.
Notably, Frontera’s fiscal support for CGX did not start this year for the Corentyne Block. In fact, Frontera has shown its commitment to the Guyana basin since it entered into relations with CGX in December 2018. An agreement was formally executed between the two on January 30, 2019 which allowed Frontera to acquire a 33.33% interest in CGX’s Corentyne and Demerara (now relinquished) blocks, in exchange for a US$33.3 million signing bonus.
Further financial assistance was extended to CGX by Frontera on July 21, 2022. Back then, the former entered into an agreement to transfer 34.67% of its interest in the Corentyne block to Frontera. This was done in exchange for: (i) up to US$130.0 million in funding for the Wei-1 well, (ii) up to US$28.8 million for certain costs pertaining to the Kawa-1 exploration well, Wei-1 pre-drill, and other costs and cash considerations.
On December 1, 2022, the Joint Venture announced that the foregoing arrangements were completed. As a result, CGX was left with a 32% participating interest and Frontera has a 68% participating interest in the Corentyne block, pending approval by the Government of Guyana.CGX, according to its latest financial report, currently has no revenues. The situation has raised eyebrows among some Frontera shareholders on what would be the way forward for CGX regarding rising exploration costs in the Corentyne Block.