CGX to give up majority interest in Corentyne block to Canadian partner to cover debt, upcoming drilling expenses
CGX to give up majority interest in Corentyne block to Canadian partner to cover debt, upcoming drilling expenses
By Kiana Wilburg
Kaieteur News – Once it receives the blessings of the Toronto Stock Exchange and the Guyana Government, CGX Energy Inc. will officially transfer majority interest in the Corentyne Block to its joint venture partner, Frontera Energy Corporation, via an amended agreement.
Map showing the location of the Corentyne Block
As part of the new deal, CGX explained that it will transfer 29.73% of its participating interest in the Corentyne block to Frontera in exchange for Frontera funding the joint venture’s costs associated with the Wei-1 exploration well for up to US$130 million and up to an additional US$29 million of certain Kawa-1 exploration well, Wei-1 pre-drill, and other costs.
In addition, CGX said it 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 two loans. They are the previously announced US$19 million convertible loan to CGX dated May 28, 2021, as amended, and the previously announced US$35 million convertible loan to CGX dated March 10, 2022, as amended, and a cash payment of US$3.8 million.
As a result of this new agreement, CGX will have a 32.00% participating interest and Frontera will have a 68.00% participating interest in the Corentyne block.
CGX said it is in the process of obtaining a formal valuation for the Corentyne block in connection with the Agreement, in accordance with the Toronto Stock Exchange Venture Exchange requirements.
Following the announcement of the transfer of interest, Professor Suresh Narine, Executive Co-Chairman of CGX said his company is pleased to complete this farm-in agreement with Frontera, which enables CGX to strengthen its balance sheet and secure funding for the Wei-1 exploration well.
“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,” said Professor Narine.
As for Orlando Cabrales, Chief Executive Officer of Frontera, he was keen to note that his company is excited to complete this agreement with CGX.
He said, “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 which is truly one of the most exciting exploration areas in the world.”
Additionally, CGX said final preparations are underway in advance of spudding the joint venture’s second exploration well, called Wei-1, in October 2022, subject to rig release from a third-party operator. It said the necessary long lead materials have been secured and are being mobilized.
As of July 15, 2022, 95% of key drilling staff that executed the Kawa-1 exploration well remains contracted for the Wei-1 exploration well. An independent operations readiness review has been completed with no significant obstacles to spud.
Kaieteur News previously reported that the Wei-1 exploration well will be located approximately 14 kilometres northwest of the Kawa-1 exploration well in the Corentyne block.
The Wei-1 exploration well will be drilled in water depth of approximately 1,912 feet (583 metres) to an anticipated total depth of 20,500 feet (6,248 metres) and will target Campanian and Santonian aged stacked channels in a western channel complex in the northern section of the Corentyne block.
CGX Resources Inc., operator of the Corentyne Block, has again contracted the Maersk Discoverer to drill the Wei-1 exploration well, maintaining continuity in the exploration programme during a period of high demand in the region and consistency in working with a team familiar with the rig, which is important from a health and safety, efficiency and operational perspective.
In conjunction with the drilling contract between CGX Resources 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 US$30 million subject to a sliding scale mechanism in connection with payments.
