Offshore staff
TORONTO — CGX Energy Inc. and Frontera Energy Corp., which are joint venture (JV) partners in the petroleum prospecting license for the Corentyne Block offshore Guyana, have agreed to amend the joint operating agreement originally signed between CGX and a Frontera subsidiary on Jan. 30, 2019, effectively farming into the Corentyne Block and securing funding for the Wei-1 exploration well.
The agreement remains subject to certain conditions precedent, including approval of the TSX Venture Exchange (which is subject to the receipt by CGX of a formal valuation), TSX acceptance of the agreement, and certain confirmations from the government of Guyana relating to the petroleum agreement for the Corentyne Block.
As part of the agreement, CGX will transfer 29.73% of its participating interest in the Corentyne Block to Frontera in exchange for Frontera funding the JV's costs associated with the Wei-1 exploration well for up to $130 million and up to an additional $29 million of certain Kawa-1 exploration well, Wei-1 pre-drill and other costs.
In addition, CGX shall assign an additional 4.94% of its participating interest in the Corentyne Block to Frontera as consideration for the repayment of the outstanding principal amounts under
- (i) the previously announced $19 million convertible loan to CGX dated May 28, 2021, as amended, and
- (ii) the previously announced $35 million convertible loan to CGX dated March 10, 2022, as amended, and a cash payment of $3.8 million.
As a result of this agreement, CGX will have a 32% participating interest and Frontera will have a 68% participating interest in the Corentyne Block.
Professor Suresh Narine, executive co-chairman of CGX, said, "Our continued partnership with Frontera reflects the significant value we have created on the Corentyne license and the opportunity set that is now before us following the discovery of hydrocarbons at the Kawa-1 exploration well. We are focused now on the transformational potential of the Corentyne Block ahead of spudding the Wei-1 exploration well in October 2022, pending rig release from the current operator."
Frontera CEO Orlando Cabrales added, "Building on the joint venture's recent light oil and condensate discovery at the Kawa-1 exploration well, the agreement supports CGX's capital needs for the Wei-1 exploration well and provides Frontera with an increased participating interest in the Corentyne Block."
Wei-1 exploration well
Final preparations are underway in advance of spudding the JV's second exploration well, Wei-1, in October, subject to rig release from a third-party operator. The necessary long-lead materials have been secured and are being mobilized.
As of July 15, 95% of key drilling staff that executed the Kawa-1 exploration well remain contracted for the Wei-1 exploration well. An independent operations readiness review has been completed with no significant obstacles to spud.
The Wei-1 exploration well will be located about 14 km northwest of the Kawa-1 exploration well in the Corentyne Block, about 200 km offshore from Georgetown, Guyana. The Wei-1 exploration well will be drilled in water depth of about 1,912 ft (583 m) to an anticipated total depth of 20,500 ft (6,248 m) and will target Campanian- and Santonian-aged stacked channels in a western channel complex in the northern section of the Corentyne Block.
CGX, operator of the Corentyne Block, has again contracted the Maersk Discoverer to drill the Wei-1 exploration well.
In conjunction with the drilling contract between CGX and Maersk, Frontera anticipates entering into a parent company guarantee with Maersk for certain obligations in connection with the day rates under the drilling contract on behalf of CGX Resources, up to a maximum of $30 million subject to a sliding scale mechanism in connection with payments made under the contract.
07.22.2022
