Canada’s CGX Energy (OYL-V) Better Placed To Tackle Guyana-Suriname Basin Potential Following Pacific Rubialies Investment
It has been a good five years now since we last looked at Canadian independent CGX Energy, which is focused on the exploration of oil in the Guyana-Suriname basin. But once discovered, never forgotten.
It now holds three licenses in this frontier basin in South America, that boasts a proven hydrocarbon system and some highly prospective deepwater plays, some of which can be drilled from shallower waters.
Indeed, the US Geological Survey, in 2000, identified the Guyana Suriname basin as having the second highest resource potential among unexplored oil basins in the world
It currently estimates mean recoverable oil reserves in the area above 13.6 billion barrels, plus a further 32 trillion cubic feet in gas reserves.This potential means it has become a playground for high impact offshore drillers such as Tullow Oil, among many others.
Unfortunately, that potential still remains largely hidden and locked away in the ground.Back in 2008, when CGX maintained a listing in London, the view then was that the company certainly held some good prospects, and in an interesting neighbourhood, but there was little money on hand to get at them, nor any production in the pipeline.
Fast forward five years and it’s hard to say that things have materially changed, with the exception of some corporate deal making.The company’s second quarter 2013 results, released late in July, showed that it had narrowed net losses to $8.5 million for the three month period to June 30; that compares with a net loss of over $94 million for the same period in 2012.
It reflects a general cost cutting drive that the board has undertaken in recent times.After a brokered private placement raised CDN $37 million in April - which gave fellow Canadian, Pacific Rubiales Energy, a hefty stake in the company - CGX’s working capital stood at just over $13 million as at June 30, 2013.
There are still a number of highlights to encourage any CGX followers though, including the pairing with Pacific Rubiales, fast emerging as a producer of note elsewhere in South America.This is likely to help drive activity in the field in the Guyana-Suriname basin, where Pacific Rubiales wants exposure.
CGX is currently in the process of re-interpreting seismic data to define the next prospect to be drilled on the Corenytne area - the earlier 2012 Eagle-1 well encountered oil and gas shows - with the assistance of its new partner and its respected technical team.
The total best estimate of prospective resources for six oil and gas prospects within the Corentyne area are impressive too, standing at 779 million barrels of oil and 743 million barrels of condensate, plus plenty of gas.
However, money continues to be a constraining factor on the group’s ambitions, which reflects in the continuing low share price, which CGX has struggled to push upwards for more than a year.
“In the short term, the company will likely require additional equity financing and will seek to widen its shareholder base with a view to longer term farm-out transactions to enhance shareholder value,” it commented in the second quarter results statement recently.
For investors with an eye on the Guyana-Suriname basin there is still potential here, but it is not going to be an overnight success story. |
