NOV-29-2012: CGX MD&A Looks like CGX filed their MD&A and financial statements (posted Nov-29-2012) on SEDAR.
Just an observation - it does seem a bit strange the Georgetown Block PA was terminated. In addition, it's also strange CGX's 5% Georgetown stake was not transferred to Repsol (as both CGX and Repsol initally signed off on the deal). Perhaps, Guyana did not approve.
Someone had posted a while ago that Repsol would need at least 20% to continue operating the Georgetown block. Are we about to see a change in operatorship for Georgetown? I sure would love to see Tullow operate instead of Repsol - just my opinion though.
Not sure how to read into this...but, after reading through the recent CGX news release (related to the Corentyne Block) you have to think CGX standing with the Guyana Government is good. Maybe jumping way ahead here - but, would believe CGX's 25% participation in the Georgetown will remain.
Next - it would seem CGX was served with a default notice on Nov-26-2012 for an amount of $11.15M (remaining balance). CGX has 65 days (or interest starts accruing) - which is approx. Feb. 1 , 2013. According to the financial data as of Sept-30-2012 - CGX has approx. $6M cash.
Within the next year 2,670,000 CGX stock options will expire (as it is doubtful CGX's share price will move above $1.83 before then). Based on CGX's June 28 filings - it seems at least another 2,900,000 stock options will expire by June 2014 (as it is doubtful CGX's share price will move above $1.36 before then). So, in total 5,500,000 stock options will likely expire in the next 19 months. From a valuation perspective (fully dillutive perspective) this is pretty good for CGX shareholders.
I do believe, however, CGX's share price will climb above .60 before January 2014 - as it is likely PRE will snap up the outstanding warrants and bring their CGX ownership from 35% to over 41%.
Highlights of recent filings:
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MD&A
As of the date of this MD&A, three of the PA’s are in negotiation with the Government of Guyana. The Georgetown PA in which CGX held a 25% participating interest terminated on November 25, 2012. The Company led by the Operator, Repsol Exploración S.A (“Repsol”), is in discussions with the Government of Guyana for the issuance of a new PPL. The Corentyne PA, which comprises the offshore portion of the Corentyne PPL, the onshore portion of the Corentyne PPL, and the Annex PPL terminates on June 24, 2013. The Company has transitioned to a new Corentyne petroleum agreement (“Corentyne PA”) and petroleum prospecting licence (“Corentyne PPL”) offshore Guyana effective as of November 27, 2012, renewable after four years for up to ten years. The new Corentyne PA applies to the former offshore portion of the Corentyne PPL, covering 6,212 square kilometres. The licence is based on Guyana’s revised specimen agreement but with terms and conditions similar to the former Corentyne PA. Under the terms of the new Corentyne PA, and during the initial period of four years, CGX has an obligation to drill two wells. CGX is still in advanced negotiations to have, the Annex PPL issued as a new PA, and the onshore portion of the Corentyne PPL merged with the Berbice PPL and issued as a new PA. While the Company believes that these discussions will result in new PPLs, there can be no assurances as to the outcome or terms of these negotiations.
On May 27, 2012, the Company entered into a definitive subscription with Pacific Rubiales pursuant to which Pacific Rubiales subscribed for 85,714,285 units of CGX by way of private placement at a price per Unit of C$0.35 for gross proceeds of C$30,000,000. Each Unit consisted of one common share and one-half of one common share purchase warrant of the Company. Each Warrant is exercisable for one CGX common share at an exercise price of C$0.60 per common share until January 9, 2014. All common shares that comprised the Units and any common shares issued on exercise of the Warrants were subject to a four month hold period from the date of issuance of the Units.
CGX's share of the estimated well cost based on the operators authorization for expenditures (“AFE”) as at September 30, 2012 was US$42,000,000 excluding indirect charges. As at November 29, CGX has settled $30,500,000 and expects to pay approximately an additional $15,900,000 in well related costs, indirect charges and general and administrative charges for expenses through to November 2012, of which, $11,150,000 for services up to September 2012 has been billed and are still outstanding. As at November 26th, 2012, the Company has been issued a default notice for its Participating Interest share of joint account expenses in the amount of $11,500,000. The Company has 65 business days from the date of the default notice in which to pay the entire amount in default. Lack of payment within five business days will result in interest being accrued on the outstanding. The Company is actively pursuing financing arrangements in order to facilitate the settlement of this outstanding debt and to remediate its default position.