CGX Energy had to relinquish the Demerara Block because it couldn’t find the funds to do its work. It turns out that CGX Energy was taken to arbitration for funds owed to Prospector PTE Ltd., a company it had hired to conduct a 3D seismic survey on the Block offshore Guyana. The two companies went before a tribunal over the quality of the seismic data, and CGX lost.
An account of the matter is recorded in CGX’s quarterly highlights for Q123.
The contract between CGX Energy and Prospector was signed in September 2014, with the seismic survey costing approximately US$19 million. While US$7 million was paid in common shares and US$2.5 million in cash in 2014, the remaining US$9.5 million was payable in cash one year after the completion of the survey (December 2015).
In 2016, CGX agreed to pay 50% of the seismic processing costs, which were estimated to be around US$1 million, in a deal that also renegotiated the interest to 6%, down from 12%. But a dispute over the quality of the data arose, and Prospector filed a request for arbitration against CGX Energy and its subsidiary in the International Chamber of Commerce in July 2018.
In April 2021, CGX filed a defence and counterclaim with the International Chamber of Commerce (ICC) for US$26.1 million in damages resulting from processing of the 3D seismic data it determined to be unsatisfactory. However, on September 13, 2022, the International Court of Arbitration of the ICC released its Partial Final Award, awarding Prospector US$9.5 million and US$0.6 million and denying CGX’s counterclaim. On November 30, 2022, the tribunal issued its Final Award, awarding Prospector US$4.3 million in pre-award interest, post-award interest at the rate of 6% per annum, and US$0.7 million for legal costs.
In October 2022, CGX challenged the Partial Final Award. On November 15, 2022, Prospector requested that the UK High Court dismiss CGX’s challenge without a hearing, and on December 19, 2022, the court did so. On January 6, 2023, CGX applied to the UK High Court to set aside the dismissal, but the court dismissed the application on March 3, 2023. Prospector also brought an application against CGX to enforce the Partial Final Award in Ontario, and the hearing took place on March 29, 2023. As of March 31, 2023, CGX had not yet recorded the outcome of the hearing in its financial statements.
CGX Energy relinquished the Demerara Block offshore Guyana due to a lack of funds to support its work commitments while focusing on the Corentyne Block’s potential commercial opportunity.