CGX Energy and its Corentyne Block partner, Frontera Energy, are on the brink of losing the Corentyne Block.
This would make CGX’s third loss of a Guyana block, following the relinquishment of the Demerara and Berbice Blocks in June 2022. Frontera had also held a stake in the Demerara Block, meaning the potential Corentyne loss would be its second in Guyana. The companies had to forfeit the two blocks, totaling 1.1 million acres, due to their inability to meet work obligations. This decision came after the material discovery at the Kawa-1 well in the Corentyne Block became the focal point of their efforts.
The appraisal program for the 994 km² Corentyne area, initiated in June 2022, is set to conclude on June 28, 2024. Despite discovering oil-bearing intervals and detecting medium sweet crude oil with 24.9 API in the Maastrichtian horizon, the financial struggle of CGX, in particular, inhibited the ability of the joint venture to satisfy their interest in a potential development at Corentyne.
Drilling at the Wei-1 and Kawa-1 wells in the Maastrichtian horizon so far yielded 81 feet of net pay. With no obligation to drill more wells, the parties believe the Maastrichtian horizon of the area holds 514-628 million barrels of oil equivalent, which they said could support a standalone development. The catch is that they still have to prove it, but CGX is not in a position to fund any such drilling operations.
CGX and Frontera sought strategic options for the Corentyne Block by engaging Houlihan Lokey, an investment bank. This move included considering a potential farm down to alleviate the financial burden. The partnership between CGX and Frontera has seen CGX’s stake in the Corentyne Block whittle away from 66.66% to 27.48%, as CGX sought funding to meet its obligations. Furthermore, Frontera’s acquisition of approximately 76.05% of CGX’s shares by December 2023 positioned it as the majority shareholder, granting it significant control over CGX’s corporate transactions.
If time runs out, the joint venture could lose the license area, allowing the government to consider other investors more financially endowed to get the job done. While the Guyana government has been lenient to CGX in the past by granting extensions, it recently took on a more strict approach to ensuring companies meet their obligations.
In the lead-up to the agreement for the relinquishment of the Demerara and Berbice Blocks, Vice President Bharrat Jagdeo had said it is “none of our business” if CGX “can’t raise the money.”
Adding to CGX’s challenges is the delayed completion of the Berbice Deep Water Port (BDWP), a project to support the oil industry and serve as a multi-purpose terminal. Plagued by delays, its completion by 2025 hinges on ongoing construction schedules, securing financing, and managing supply chain issues. CGX also faces financial obligations to Prospector PTE Ltd., which conducted a 3D seismic survey on the now-relinquished Demerara Block. CGX had lost a dispute over the quality of the seismic data and owed US$15.9 million to Prospector, as of December 31, 2023.
