Govt. reviewing CGX plans to relinquish 25 % of Corentyne Block

Mar 03, 2023 News

Kaieteur News – Canadian oil explorer, CGX Energy Inc. recently disclosed that plans are moving ahead to relinquish 25 percent of the Corentyne Block.

In its latest financial statement, CGX said it has submitted its proposed 25% acreage relinquishment as required by the Corentyne Petroleum Agreement to the Ministry of Natural Resources and the Guyana Geology and Mines Commission (GGMC). It is now awaiting the agreement of these agencies on the acceptance of the proposed relinquishment and final instruments.

On January 23, 2023, CGX and its joint venture partner, Frontera Energy Corporation, had announced the spud of the Wei-1 well, approximately 200 kilometres offshore Guyana. The joint venture also announced that the Government of Guyana approved an appraisal plan for the northern section of the Corentyne block which commenced with the Wei-1 well.

Following completion of Wei-1 drilling operations and upon detailed analysis of the results, the partners may consider future wells per its appraisal programme to evaluate possible development feasibility in the Kawa-1 discovery area and throughout the northern section of the Corentyne block. They said any future drilling is contingent on positive results at Wei-1. This newspaper understands that the joint venture has no further drilling obligations beyond the Wei-1 well. The appraisal programme was approved for a period of 24 months from June 29, 2022 to June 28, 2024.

The original Corentyne Petroleum Agreement was awarded in 1998, following which CGX began an active exploration programme, however the activities were suspended due to a border dispute between Guyana and Suriname. In 2007 an International Tribunal confirmed that 93% of the original Corentyne Petroleum Production Licence was located in Guyana’s territorial waters.

The original Corentyne Petroleum Agreement was extended to June 2013. The company drilled the Eagle well in 2012 which was declared as a dry-hole. On November 27, 2012, CGX received the current Corentyne Petroleum Agreement, offshore Guyana, renewable after four years for up to six additional years.

Map showing the location of the Corentyne Block and the Wei-1 well

After commercial production begins, the Company is allowed to recover contract costs as defined in the Corentyne agreement from “cost oil” produced and sold from the contract area and limited in any month to an amount which equals 75% of the total production from the contract area for such month excluding any hydrocarbon used in petroleum operations or which is lost. The company’s share of the remaining production or “profit oil” is 47%.

Additionally, CGX in its financial statement said it has US$155M of recoverable contract costs brought forward from the original Corentyne licence. This cost can be recovered against any future commercial production.

It should be noted that Frontera holds 257,475,469 common shares in CGX Resources Inc., representing approximately 76.97% of the issued and outstanding common shares on an undiluted basis. Frontera therefore has the voting power to influence the outcome of all corporate transactions or other matters requiring the approval of CGX’s shareholders, including a merger, a business combination or the sale of all or substantially all of CGX’s assets.

Kaieteur News understands that this influence may limit the price that investors are willing to pay for common shares or discourage third parties from making a tender offer or takeover bid to acquire any or all of the outstanding common shares. In addition, there exists the potential that Frontera may sell its common shares in the public market (commonly referred to as “market overhang”), and these shares as well as any actual sales of such common shares in the public market, could adversely affect the market price of the common shares.

• CGX, Corentyne Petroleum Agreement, Frontera Energy Corporation, Guyana Geology and Mines Commission (GGMC), Ministry of Natural Resources