Joint Venture AnnouncementDuring the last AGM, Mr. Kerry Sully by a small slip of the tongue suggested that the joint venture partner will be announced in early August. (Listen carefully to his speech).
Based on the players in Guyana, the joint venture partner is likely to be either Reposl or Exxon.
Repsol in partnership with IBM recently developed a program that can analyze seismic data. To allow companies to predict with a higher degree of certainty the probability of finding oil. If this program was available to Repsol at the time they drilled in Suriname, they may not have drilled that dry hole. A higher degree of certainty reduces dry holes, costs and damage to a company's share price.
Exxon on the other hand has almost unlimited resources, technology, drill ships and experience in deep sea drilling. This will allow them to go 6000 metres as in Brazil where they found 8 billion barrels of oil. Also they can drill earlier and bring oil ashore earlier.
CGX is in a very strong position, has laid the ground work and can demand much from a JV partner without giving up too much. The partnership is likely to be 50/50 and not 20/80. The JV Partner will have to pay CGX a signature bonus of about US$75 - US$125 million as is the norm in high impact areas. This together with CGX cash in hand translates to about $1.33 per share.
Cash plus early drilling, a strong JV partner, good prospects for oil and a higher degree of predictability will see CGX share price reach $6.00 before mid August.