Canadian company to spend almost US$140M on second well in Corentyne Block

Feb 03, 2023 News

– Guyana’s oil to stand full costs, if discovery is made

Kaieteur News – Canadian oil explorer, Frontera Energy Corporation, disclosed yesterday that it anticipates spending approximately US$120-US$140 million on the Wei-1 well, in the Corentyne block, offshore Guyana. It said this expenditure will come from existing resources. If a discovery is made, the full costs will be recovered.

Frontera said in a statement that the total cost of the Wei-1 well, including 2022 pre-drill costs and costs related to drilling delays, are forecast to be approximately US$160-US$170 million.

The Canadian firm said the Wei-1 well is located approximately 14 kilometres northwest of the Joint Venture’s previous Kawa-1 light oil and condensate discovery and will target Maastrichtian, Campanian and Santonian aged stacked sands within channel and fan complexes in the northern section of the Corentyne block. The Wei-1 well will appraise both the Kawa-1 discovery as well as explore additional opportunities within the Corentyne block.

Chief Executive Officer, Orlando Cabrales, commented that Frontera’s 2023 capital programme aims to deliver stable cash flow and US$425-US$475 million operating Earnings before interest, taxes, depreciation, and amortization (EBITDA) at US$80/bbl average Brent prices from the company’s proven and diverse asset base while also investing for future growth through facilities expansion and both near-field and high-impact exploration.

Map showing the location of the Corentyne Block

The Frontera boss said his company’s 2023 programme is fully funded from existing cash and 2023 cash flows, features balanced capital allocation across its most productive and prospective blocks, basins, and countries, supports ongoing efforts to diversify production mix and lays the foundation for the company’s path to grow production to 50,000 boe/d.

In 2023, he said, “We will advance the company’s exciting development and lower-risk exploration portfolio in Colombia and Ecuador…execute our hedging programme to protect our revenue generation and manage our exposure to price volatility, and seek to build on our Kawa-1 light oil and condensate discovery with the Wei-1 well, our second exploration well offshore Guyana.”

Frontera is a partner in the Corentyne Block alongside CGX Energy.

In 2020, CGX had submitted its proposed 25% acreage relinquishment which are required by the Corentyne Petroleum Agreement to the Ministry of Natural Resources and the Guyana Geology and Mines Commission (GGMC) and is now awaiting the agreement of these agencies on the acceptance of the proposed relinquishment and final instruments to formally move into the second renewal period of the Corentyne PA.

If a discovery is made, CGX said it has the right to apply to the Minister for a Petroleum Production Licence (PPL) with respect to that portion of the contract area having a significant discovery.

After commercial production begins, the company is allowed to recover contract costs as defined in the Corentyne PA from ‘cost oil’ produced and sold from the contract area and limited in any month to an amount which equals 75% of the total production from the contract area for such month excluding any hydrocarbon used in petroleum operations or which is lost.

When it comes to the Corentyne Block, CGX made it known in its financials dated at October 31, 2022, that it has US$155.0 million of recoverable contract costs brought forward from the original licence. This cost can be recovered against any future commercial production.

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Canadian oil explorer, Frontera Energy Corporation, Kawa-1 l, Orlando Cabrales, Wei-1 well

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