CGX Energy Loses Majority Interest In Corentyne Block In Attempt To Fund Exploration
In an attempt to fund its exploration, CGX Energy (TSXV: OYL) has given up majority ownership on its flagship asset. This follows the company last month announcing that it was going all-in on the project, and abandoning its exploration efforts elsewhere.
The arrangement will see the company amend a joint operating agreement currently in place with Frontera Energy (TSX: FEC) in an attempt to secure funding for the Wei-1 exploration well, which is set to be spud later this year. In effect, the company will transfer to Frontera a 29.73% interest in the Corentyne oil and gas concession, which is found in Guyana.
That transfer is expected to cover up to US$130 million in funding for the Wei-1 exploration well. It will also fund a further US$29 million in additional expenses for the Kawa-1 well, the pre-drill expenses of Wei-1, along with other undisclosed costs.
On top of that, a further 4.94% interest in the property will be provided to Frontera as a means of settling an outstanding US$19 million convertible loan from 2021, and a US$35 million convertible loan from March. The company is also believed to be receiving a cash payment of US$3.8 million.
In total, as part of the agreement, CGX Energy will see its interest in the Corentyne block decline by 34.67%, leaving its interest at 32%. Frontera meanwhile will see its interest in the block climb to 68.0%.
“CGX 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,” commented Suresh Narine, Executive Co-Chairman of CGX Energy.
The transaction follows the company announcing last month that it would be relinquishing its interest in the Berbice and Demerara blocks in Guyana as the firm turns its focus to Corentyne. At the time of announcement, CGX indicated that Wei-1 would be spud in the third quarter of 2022. The well is now slated to be spud in the fourth quarter of this year.
CGX Energy last traded at $1.12 on the TSX Venture.
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