CGX cannot afford to fully insure Guyana operations

Mar 05, 2023 News

– warns shareholders there is no guarantee against multiple financial risks

Kaieteur News – While it continues efforts drilling an impressively deep well in the Corentyne Block called Wei-1, Canadian explorer, CGX Energy Inc. was keen to remind shareholders that its operations are subject to all manner of fiscal and environmental risks.

In its latest financial report, the company said offshore operations involve a higher degree of risk than those onshore due to the remoteness. It explained that oil and natural gas exploration involve many risks that even a combination of experience, knowledge, and careful evaluation may not be able to overcome. Expounding on these risks it said, “Fires and explosions on drilling rigs and other offshore platforms are more likely to result in personal injury, loss of life and damage to property due to the remote locations and time required for rescue personnel to get to the location.”

CGX said too that blow-outs and spills are more likely to result in significant environmental damage to the marine environment and can be difficult to contain and difficult and expensive to remediate. CGX said, “There can be no assurance that these risks can be avoided,” while adding that the occurrence of any of these events may have a materially adverse effect on the corporation.

In accordance with industry practice, CGX also told shareholders that it has normal and customary insurance coverage to address a certain number of these risks. It said however that the nature of these risks is such that “liabilities could exceed policy limits, in which event the Corporation may incur significant costs.”

Additionally, CGX said such insurance may not be available in the future, may be price-prohibitive, or contain limitations on liability that may not be sufficient to cover the full extent of such liabilities. It said too that there can be no assurance that CGX will be able to obtain the insurance coverage that it believes is appropriate.

In addition, the company’s report said, “the risks to which CGX’s operations are subject may not in all circumstances be insurable or, in certain circumstances, CGX may elect not to obtain insurance to deal with specific risks due to the high premiums associated with such insurance or other reasons.”

CGX said the payment of such uninsured liabilities would reduce the funds available to it for other purposes.

The Canadian explorer also noted that it obtains insurance for its operations that it believes are appropriate for each specific activity. It said, however, there can be no assurance that proceeds from such insurance will be sufficient to cover CGX’s related losses. It said the occurrence of a significant event that CGX is not fully insured against, or the non-payment by the insurer in connection with such event, could have a material adverse effect on CGX’s financial position and/or its results of operations.

Kaieteur News Publisher, Glenn Lall believes the foregoing information released by CGX proves once again why Guyana needs full coverage insurance for the Stabroek Block where there is an aggressive exploration and production programme ongoing by an ExxonMobil-led consortium.

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Canadian explorer, CGX Energy Inc, Corentyne Block, operations, Wei-1

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