CGX’s Eagle-1 Well Offshore Guyana Disappoints

CGX Energy Inc. announces the results of the drilling of the Eagle-1 well on the Company’s 100% owned and operated Corentyne Petroleum Prospecting License (“PPL”), offshore Guyana.

The Eagle-1 well reached total depth of 4,328 metres on April 25th in the upper Cretaceous Maastrictian geologic zone on an 8 ½ ” diameter hole and with synthetic oil based mud drilling fluid. During drilling, the Eagle-1 well encountered oil and gas shows through the objective Eocene and Maastrichtian geologic zones and at the, yet to be confirmed, Oligocene zone indicating an active petroleum system where generated hydrocarbons have migrated through the pre-Miocene section drilled by the well. Although wire-line logs provided encouraging results with high resistivities correlating with sandstones that had encountered oil shows, additional open hole logs were necessary to determine the nature of the fluids in those zones. Hence, CMR (combinable magnetic resonance) and MDT (modular formation dynamics) were run and both logs identified the presence of good quality sandstone reservoirs that unfortunately proved to be water bearing. Further analyses will be conducted to verify the geological age of the drilled section as well as the chemical composition of the recovered fluids.

The Eagle-1 well was initially budgeted for 60 days of drilling but experienced weather delays and mechanical issues which extended operations for approximately an additional 30 days. The initial cost estimate for the Eagle-1 well was $55 million, however with the delays the Eagle-1 well is now estimated to cost $71 million. As a result, the Company will need to raise approximately $20 million in the near term.

Jaguar progressing

The Jaguar-1 well on the Georgetown PPL in which CGX has a 25% interest with partners Repsol Exploración S.A (operator), YPF Guyana Limited and Tullow plc, continues. Total depth for the well is projected at 6,500 metres to test the Turonian geologic zone. The Jaguar-1 well was spud on February 9, 2012 and is expected to take 180 days. Drilling operations are progressing as planned.

Kerry Sully, President and CEO, stated, “Although the results of the Eagle-1 well are disappointing for all stakeholders, this test has gathered valuable information that will assist CGX with determining the drilling location for its next well to be drilled on the Corentyne PPL and for other future targets. The Company’s geosciences team has been interpreting the recently acquired 3D and additional prospects have been identified. In addition, the team has established that the up-dip termination of our Eagle Deep Turonian prospect is at a shallower depth than originally anticipated. Now that the Eagle-1 well has finished drilling and in response to expressions of interest, CGX is re-opening the data room to re-start the joint venture process.”

CGX Energy is a Canadian-based oil and gas exploration company focused on the exploration of oil in the Guyana-Suriname Basin, an area ranked second in the world for oil and gas prospectivity by the United States Geological Service. CGX is managed by a team of experienced oil and gas and finance professionals from Guyana, Canada, the United States and the United Kingdom.

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Source: CGX, May 8, 2012