Stabroek Block discoveries spark re-sequencing of CGX work programme for Corentyne Block

Aug 04, 2019 News

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By Kiana Wilburg

Initially, CGX Resources Inc. (CRI) was scheduled to drill one exploration well on the Corentyne Block. After this, the Canadian based operator would have proceeded with seismic processing.

But following two major oil discoveries by ExxonMobil on the northern edge of the Stabroek Block which kisses the corners of CGX’s Corentyne Block, some re-sequencing of the latter’s work programme has been done.
It was only yesterday that CGX Energy Inc., the parent company of CGX Resources Inc., made the announcement that it will pursue a re-sequenced programme.
CGX explained that last February, it had intended to use US$11.2 million from a rights offering to drill the Utakwaaka well by November 27, 2019. Kaieteur News understands that this well would have been drilled almost in the middle of the Corentyne Block.
The firm noted however that the new programme which received Government’s approval, will instead, utilise the US$11.2M to complete a seismic survey at the northern region of the Corentyne Block by November 27, 2019.
The balance of funds would be used for the company’s re-sequenced exploration well to be drilled by November 27, 2020 on the Corentyne Block.
CGX said that this re-sequencing will not change the company’s overall work commitment on the Corentyne Block, and may also involve other related projects, but should better position it in the long-term.
CGX said that the benefit of the re-sequenced work programme, which allows seismic assessment to be conducted over the northern region of the Corentyne Block before drilling of an exploration well, is that it will allow the company to gain a more complete technical understanding of the Corentyne Block and in particular, its northern sector.
The Company further stated, “Given recent large discoveries in an adjacent block, which provides a strong indication that hydrocarbons have migrated into the northern region of the Corentyne Block, this seismic assessment will allow CRI to more comprehensively evaluate the hydrocarbon potential of the Corentyne Block and help it assess whether it first drills the Utakwaaka well or another well located in the northern region of the block.”
While it did not state any specifics, the only discoveries made to date offshore Guyana are in the Stabroek Block. A perusal of the locations of the Exxon discoveries to date shows that the Pluma and Haimara-1 wells sit right at the edge of the Stabroek Block which also faces the northern border of the Corentyne Block.
The Pluma-1 well, which was discovered in December 2018, encountered approximately 121 feet (37 meters) of high-quality hydrocarbon-bearing sandstone reservoir. Pluma-1 reached a depth of 16,447 feet (5,013 meters) in 3,340 feet (1,018 meters) of water.
Wood MacKenzie’s preliminary estimate for the Pluma-1 well is that it holds at least 300M barrels of oil equivalent.
Discovered in January, the Haimara-1 well encountered approximately 207 feet (63 meters) of high quality, gas condensate bearing sandstone reservoir. The well was drilled to a depth of 18,289 feet (5,575 meters) in 4,590 feet (1,399 meters) of water. It is located approximately 19 miles (31 kilometers) east of the Pluma-1 well and is a potential new area for development. Rystad Energy recently noted that Haimara is part of trio oil field that potentially holds 800M barrels of oil equivalent reserves.
CGX noted that the re-sequenced programme may mean that certain prior agreements that it entered into may need to be revised while noting that this is expected to be in its best interests.
ADDITIONAL PLANS
It was also noted that CRI and its joint venture partner, Frontera Energy, plan to commence a new commitment well in the Demerara Block in 2020 that was not initially planned to occur until February 2021. Kaieteur News understands that it should occur either immediately before or after the commitment well is drilled in the Corentyne Block. Kaieteur News also understands that this approach may also result in significant cost savings for the company.
Furthermore, the company will, through its wholly owned subsidiary Grand Canal Industrial Estates, also begin civil works in 2019 on its Deep Water Port at Crab Island in the Berbice River so that it can stage its exploration wells in 2020 from its Deep Water Port.
Professor Suresh Narine, Executive Chairman and Executive Director of CRI said that the partners are focused on maximising the partnership’s chances of exploration success while increasing efficiencies, ensuring safety and managing costs.
Professor Narine said that the re-sequenced work programme establishes the right chronology of actions to allow these guiding principles to be realised. Furthermore, the Executive Chairman asserted that it allows CGX to maximise its local content engagement through the operationalisation of its Deep Water Port at Crab Island at the mouth of the Berbice River.
FINANCIAL POSITION
Along with its re-sequenced work programme, CGX provided an update on its financial position, specifically disclosing details from its unaudited consolidated financial statements for the second quarter of 2019, together with its Management, Discussion and Analysis – Quarterly Highlights.
CGX reminded that on May 3, 2019, the Government approved the farm-in joint venture agreements (‘JOAs’) covering two shallow water offshore Petroleum Prospecting Licences in Guyana, in the Corentyne and Demerara blocks, between CRI and Frontera Energy Guyana Corporation (FEGC).
CGX said that the JOAs provided for a transfer of a 33.333% interest in both the Corentyne and Demerara Petroleum Prospecting Licences and Petroleum Agreements in exchange for a US$33,333,000 signing bonus.
Under the JOAs, FEGC will pay one-third of the applicable costs plus an additional 8.333% of the company’s direct drilling costs for the initial exploratory commitment wells in the two blocks subject to certain thresholds.
Further, on May 28, 2019, CGX noted that the transfers of the 33.333% interest in both the Corentyne and Demerara Prospecting Licenses were completed. It said that the transfers were effective on May 20, 2019. As a result, on May 28, 2019, CGX said that the Company received US$8,500,851, being the net of the US$33,333,000 signing bonus due from FEGC, less the amount of US$24,832,149 of the outstanding debt owed to FEGC by the Company.
For the six-month period ended June 30, 2019, the company said it improved its working capital deficiency by $56,525,771 and recorded cash on hand as at June 30, 2019 of $22,574,722.
It also said that it incurred net exploration and evaluation expenditures of $5,256,609 during the six-month period ended June 30, 2019 primarily due to activities being undertaken to satisfy work commitments under CRI’s Corentyne Block Petroleum Agreement.

 

 

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