JULY-29-2013: CGX ‘CONVINCED’ OF COMMERCIAL PETROLEUM RESERVESFYI -
https://www.guyanachronicleonline.com/site/index.php?option=com_content&view=article&id=62262:cgx-energy-convinced-of-commercial-petroleum-reserves--in-guyana-suriname-basin&catid=4:top-story&Itemid=8
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Monday, 29 July 2013 21:57
Pull Quote: Explorer interest is driven by the recent oil finds in French Guiana and West Africa, two areas which are known to share similar geological properties
OIL and gas exploration company CGX Energy Inc. is “convinced” of the presence of commercially viable reserves of petroleum in the Guyana-Suriname Basin.
“We have been operating here for a long time, and this is the only basin that CGX and [our subsidiary] ON Energy [are] focused on,” the company’s chairman Dr. Suresh Narine told the Guyana Chronicle in an exclusive interview yesterday, adding: “Our interest in the basin has grown rather than decreased.”
He noted that CGX’s confidence in the oil and gas potential of the basin is “mirrored” by the increase in the number of large petroleum companies that have “crowded” that region.
This surge in explorer interest, he indicates, is driven by the recent oil finds in French Guiana and West Africa, two areas which are known to share similar geological properties.
Independent estimates by such entities as DeGolyer and MacNaughton and the US Geological Survey, suggesting large reserves have also fed the exploration frenzy, Dr. Narine suggested, adding: “It is estimated that the success probability in the basin is 1 in 5.”
Exploration Finance
In its 2012 financial statement published yesterday in this newspaper, CGX’s locally-registered subsidiary ON Energy posted administration losses of nearly $4 million and pegged its accumulated losses at nearly $2.6 billion.
However, Dr. Narine, who is also Chairman of ON Energy, cautioned that because CGX is currently an exploration company and does not actually produce, the losses are not production or asset losses but as a result of a drop in share prices. “Losses connote a specific message and should be well understood,” he stressed. The value of an oil exploration company’s shares, he indicates, is influenced by the potential of the basin to host oil and gas reserves (prospectivity) as well as the company’s demonstrated successes, experience in the basin, and licenses owned.
Its access to technical data and the effectiveness of the technical and managerial teams also weigh on the company’s share prices, he adds. Dr. Narine notes, too, that CGX’s share prices are valued highest when it is involved in drilling activities. “This of course makes sense as investors would be looking forward to an imminent positive result and therefore would invest more in the stock, resulting [in] an escalation of share price due to the increased demand,” he explains.
“Investor interest” According to the CGX Chair, the company’s prospectivity has increased since it and ON Energy have renewed their licenses. ON Energy wields an onshore Berbice license while CGX owns offshore Corentyne and Demerara licenses.
“The company [as well as its subsidiary] has secured, for a period of 10 years, its ability to explore for petroleum on the [enviably positioned] acreages covered by those licenses ,” he informed this publication, positing: “This accrues significantly to its prospectivity.”
According to Dr. Narine, CGX and ON Energy, having drilled more wells than any other exploration company in the Guyana-Suriname basin, CGX and ON Energy are the most experienced operators in that region and are “probabilistically closer than any other company to finding commercial reserves.” Over the course of its operations, he points out, CGX and ON Energy have “collected a wealth of technical data in the basin”, which significantly enhances its chances of a major oil find.
Dr. Narine, who is also a professor at Trent University, goes on to note that while his company is yet to discover commercial reserves of petroleum, CGX’s majority shareholder, Pacific Rubiales Energy (PRE), has an “enviable geological success rate” of 83 percent.
PRE’s success rate accrues to CGX and ON Energy, he asserts, saying, “With the involvement of PRE, CGX and ON has access to a proven, world-class geological and engineering team.”
The professor adds that CGX and ON have also significantly restructured their shared managerial team, “focusing most of its [company’s] dollars on exploration and maintaining a proven, professional managerial team with an enviable experience base.”
Dr. Narine notes that the enhanced prospectivity as well as the improved technical capacity of CGX and ON Energy “positions the two companies to approach their next phase of exploration with renewed investor interest.”
“New wells”
The CGX Chairman indicated that the company is currently in discussions with a number of potential partners, and that CGX will “most likely” announce a joint venture at the same time it announces the “timelines for resumption of drilling.”
“We are therefore not unduly concerned about the current calculated losses based on share price, as the share price is expected to increase significantly once we announce our next well,” he assured.
According to Dr. Narine, besides PRE, CGX shares are held by minority holders such as Goldman Sachs among other import institutional investors.
Meanwhile, he adds, while CGX holds a majority stake in ON Energy, other investors in that company include the Beharry Group of Companies, Demerara Distillers Limited and various local shareholders.