Review of Q1 MD & ASince this is my only holding requiring research and I am considering adding shares I was reviewing my notes/files and thought I would share these with anyone that may not have already seen or seen. I had a question or two below if anyone would like to answer or contribute.
From Q1 MD & A:
It appears there are two FEC unrestricted subsidiaries in Guyana.
The 2028 Unsecured Notes are senior, unsecured notes and rank equal in right of payment with all existing and future senior unsecured debt. As at March 31, 2022, the 2028 Unsecured Notes were guaranteed by the Company’s subsidiaries, Frontera Colombia and Frontera Guyana. On April 11, 2023, the Company designated Frontera Energy Guyana Holding Ltd. (“Frontera Holding”) and Frontera Guyana as unrestricted subsidiaries and released Frontera Guyana as a note guarantor under the indenture governing the Company's outstanding 2028 Unsecured Notes. Frontera Colombia remains as the sole guarantor of the 2028 Unsecured Notes. Under the terms of the 2028 Unsecured Notes, the Company (excluding the Unrestricted Subsidiaries) may, among other things, incur indebtedness provided that the consolidated debt to consolidated adjusted EBITDA ratio(1) is less than or equal to 3.25:1.0 and the consolidated fixed charge ratio(2) is greater than or equal to 2.25:1.0. In the event that these financial tests are not met, the Company may still incur indebtedness under certain permitted baskets, including an aggregate amount that does not exceed the higher of $100.0 million and 10% of consolidated net tangible assets(3). The 2028 Unsecured Notes also contain covenants that limit the Company’s ability to, among other things, make certain investments or restricted payments, including dividends and share buybacks. As at March 31, 2023, the Company is in compliance with all such covenants.
From Q1 MD & A:
Here is where they disclose that SLB is playing a big part in the drilling of the Wei. To me, that is a big plus. The bottom paragraph, when they refer to the "Company" are they referring to CGX or to FEC? I think it important if it refers to CGX. As where is CGX going to get $42mm if this vague paragraph refers to them as the company. As I do not think FEC owns any part of the Berbice port directly and would not no $$$ oblgations there. Am I correct here, they just own 77% of CGX?
Also, it mentions an appraisal plan has already been approved before the completion of the Wei.
I think it highly unlikely that Catalyst wants to drill more $200mm well, but could this mean that Guyana has to a plan that would allow them to convert the Wei into an appraisal well as has been mentioned by some and flow test it to try and somehow bring the mostly untested Kawa well into any potential discovery? I know it was mentioned here that it would cost another $20 to $30mm, likely more to add a flow test, but at this point if the well looks promising an actual flow test could mean the differnce of a $1Billion+ in the event of a sale as again, I sincerely doubt the Funds owning controlling interest of FEC are going to want to extend this years longer go into a costly appraisal phase even with a Major JV partner(s)
Guyana Commitments As at March 31, 2023, the Company, through its 76.97% interest in CGX and directly through its working interest has certain work commitments under the Petroleum Prospecting License (“PPL”) for the Corentyne block, offshore Guyana (Frontera 68% W.I. and non-operator). In accordance with the PPL for the Corentyne block, a second exploration well was required to be spud by January 31, 2023, which was extended from the previous expiry date of November 26, 2022. On January 23, 2023, CGX and Frontera, the majority shareholder of CGX and joint venture partner of CGX (the “Joint Venture”) announced that the Joint Venture had spud the Wei-1 well on the Corentyne block, approximately 200 kilometers offshore from Georgetown, Guyana. In addition, the Government of Guyana has approved an Appraisal Plan for the northern section of the Corentyne block, which commenced with the Wei-1 well. Following completion of Wei-1 drilling operations and upon detailed analysis of the results, the Joint Venture may consider future wells per its appraisal program to evaluate possible development feasibility in the Kawa-1 discovery area and throughout the northern section of the Corentyne block. In addition, in connection with (i) a drilling contract agreement between Maersk Drilling Holdings Singapore Pte. Ltd. (now NobleCorp.) and CGX Resources Inc. (“CGX Resources”), the operator of the Corentyne block, for the provision of a semisubmersible drilling unit owned by NobleCorp. and associated services to drill the Joint Venture’s Wei-1 well, and (ii) a services agreement between Schlumberger Guyana Inc. (“Schlumberger”) and CGX Resources for the provision of certain oilfield services and the supply of related goods and products for the Corentyne block, Frontera entered into a deed of guarantee with each of NobleCorp. and Schlumberger for certain obligations, in each case up to a maximum of $30.0 million and subject to a sliding scale mechanism in connection with payments made under the drilling contract with NobleCorp. or the services agreement with Schlumberger, as applicable. As at March 31, 2023, CGX had entered into purchase orders and contracts for the drilling of the Wei-1 well and the Guyana Port Project, pursuant to which the Company has amounts outstanding of $42.0 million, which is expected to be paid during 2023.