Funds secured for upcoming exploration well in Guyana
Canada’s CGX Energy and Frontera Energy, partners in the Corentyne block offshore Guyana, have announced a transaction for the block, which secures funding for their next exploration well there.
As announced on Friday, CGX Energy and Frontera Energy entered into an agreement to amend the Joint Operating Agreement originally signed between CGX and a subsidiary of Frontera on 30 January 2019, as amended, effectively farming into the Corentyne block and securing funding for the Wei-1 exploration well. The agreement remains subject to certain conditions precedent, including certain confirmations from the Government of Guyana.
Professor Suresh Narine, Executive Co-Chairman of CGX, said that the agreement enables the company to strengthen its balance sheet and secure funding for the well, adding: “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.”
The Kawa-1 well was spud in August 2021, using the Maersk Discoverer rig. Initial results from the well were announced at the end of January 2022 and the JV then also committed to drill the second well, Wei-1, on the block. A light oil and gas condensate discovery at the Kawa-1 well was confirmed in May 2022.
Narine added: “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.”
Orlando Cabrales, Chief Executive Officer of Frontera, stated: “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.”
Terms of agreement
As part of the agreement, CGX will transfer 29.73 per cent 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 $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 will assign an additional 4.94 per cent 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 28 May 021, as amended, and (ii) the previously announced $35 million convertible loan to CGX dated 10 March 2022, as amended, and a cash payment of $3.8 million.
As a result of this agreement, CGX will have a 32 per cent participating interest and Frontera will have a 68 per cent participating interest in the Corentyne block.
Wei-1 exploration well
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. The necessary long lead materials have been secured and are being mobilized. As of 15 July 2022, 95 per cent 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 approximately 14 kilometres northwest of the Kawa-1 exploration well, approximately 200 kilometres offshore from Georgetown, Guyana. 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, the 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.