CGX Energy and its Corentyne Block partner, Frontera Energy, have less than four months remaining on their appraisal program for the 994 km2 license area.
The appraisal program was approved for a period of 24 months from June 29, 2022 to June 28, 2024, based on the Kawa-1 discovery. It began with the drilling of the Wei-1 well last year.
CGX said drilling at the Wei-1 well encountered multiple oil-bearing intervals in the northern part of the Corentyne Block. However, its focus on the Maastrichtian was noted, with the presence of medium sweet crude oil with 24.9 API detected there. CGX believes the Maastrichtian’s rock quality is analogous to that of the Liza discovery in Exxon’s Stabroek Block. In the Maastrichtian horizon, drilling at Wei-1 and Kawa-1 returned a combined 81 feet of net pay.
What the joint venture does in the final four months of its appraisal program is pivotal. While there is 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 say 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.
The joint venture said they hired Houlihan Lokey, an investment bank and capital markets expert, to help sort out strategic options for the Corentyne Block, including a potential farm down.
When Frontera first farmed into the Corentyne Block in 2019, it got a 33.33% stake alongside CGX’s 66.67%. CGX, which has a history of operating losses, has struck multiple deals with Frontera to secure the funds needed to fulfill its obligations. Having sold much of its stakes, CGX’s stake in the Corentyne Block is now 27.48%, with Frontera holding 72.52%.
CGX has also sold much of its issued and outstanding common shares to Frontera. CGX is now Frontera’s majority-owned subsidiary, as Frontera held approximately 76.05% of its shares as of December 31, 2023, and has the voting power to influence the outcome of all CGX’s corporate transactions.
CGX must also find the money to complete the Berbice Deep Water Port (BDWP). The project has been plagued by delays, with CGX finally expecting a partial start-up, to support cargo operations, in Q2 2024. The port is designed to support the oil industry and be a multi-purpose terminal for various cargo. Completion of the port in 2025 is contingent upon ongoing construction schedules, the procurement of financing, and the management of supply chain challenges. CGX’s financial inhibition also includes sums owed to Prospector PTE Ltd. CGX had hired Prospector to conduct a 3D seismic survey on the Demerara Block, which it was eventually forced to relinquish because it couldn’t meet its obligations. The two companies went before a tribunal over the seismic data quality, and CGX lost.
As of December 31, 2023, CGX owes Prospector US$15.9 million for the amounts claimed by Prospector.
