CGX transfers 4.7% in Corentyne oil block shares to Frontera

– JV partner to fund additional drilling expenses from Wei-1 well

Frontera Energy and CGX Energy, the two joint venture partners in the Corentyne Block, have amended their Joint Operating Agreement (JOA) that will see Frontera increasing its ownership within the block by 4.7 per cent.
Previously, CGX held a 32 per cent participating interest in the Corentyne Block while Frontera held the remaining 68 per cent. But following the JOA amendment, Frontera will now hold 72.7 per cent and CGX, 27.3 per cent.
During a recent conference call, Frontera Chief Executive Officer (CEO) Orlando Cabrales explained that there were a number of factors that went into this decision. These factors include the increased costs of drilling the Wei-1 well, where oil was recently found.
“Frontera CGX entered into an agreement to amend the Corentyne Block (agreement) to cover the unexpected additional costs of the Wei-1 well, associated with the delayed release of the rig by a third party, sampling and the drilling of the bypass well.”
“As a result of this agreement, if the maximum amount is transferred by CGX, the company would have 72.7 participating interest and CGX will have a 27.3 participating interest in the block,” Cabrales said.
And in Frontera’s second quarter 2023 results, the company further expounded on the amendments to the agreement. It was explained that the transactions will remain subject to regulatory approvals, including approval of the TSX Venture Exchange – the Canadian stock exchange.
“As part of the JOA Amending Agreement, CGX will transfer 4.7 per cent of its participating interest in the Corentyne Block to Frontera in exchange for Frontera funding CGX’s additional expected outstanding share of the joint venture’s costs associated with the Wei-1 well (the “CGX Corentyne Block Expenses”) for up to $16.5 million,” the company stated.
“As a result of the JOA Amending Agreement, if the full 4.7 per cent participating interest is transferred by CGX and not re-assigned, the company will have a 72.7 per cent participating interest and CGX will have a 27.3 per cent participating interest in the Corentyne block.”
Back in June 2023, CGX had announced an oil find in its Corentyne Block Wei-1 bypass well, after drilling to a total depth of 20,450 feet. Previously, CGX had drilled the original Wei-1 well to a depth of 19,142 feet. The bypass well was intended to further explore the Santonian target for the well. According to CGX, 71 feet of net oil had previously been encountered.
“Prior to the bypass, the well encountered an aggregate of approximately 71 feet of net oil pay in the secondary target reservoirs in the Maastrichtian and Campanian. Following the bypass, data collected from LWD (Logging While Drilling) and cuttings indicate multiple hydrocarbons shown in the primary target reservoirs in the Santonian interval,” CGX said.
According to CGX, the results from the well are encouraging and data acquisition will be done via wireline logging and core sampling. According to the company, further information will be provided when acquisition and evaluation are done. In the meantime, they further projected that the costs to drill the well has been adjusted.
“Results from the well are consistent with pre-drill expectations. The well has confirmed the company’s geologic and geophysical assessment of the block. As operations continue, the joint venture has revised its total Wei-1BP1 cost estimates to approximately $190-$195 million to complete the logging runs, finish well operations, and release the rig.”
“The additional costs are primarily due to the lost sampling tool and the drilling of the bypass well. The well was drilled by CGX and Frontera Energy Corporation. CGX holds a 32 per cent participating interest with Frontera holding the remaining 68 per cent participating interest in the Corentyne Block, offshore Guyana,” CGX had further said.
Evaluation of oil that was found in the Wei-1 well, could meanwhile wrap up within months and the results will be used to inform the company on whether it should make history as the second set of oil companies to start up production in Guyana. (G-3)