RE:Q1-2021 FRONTERA EARNINGS CALL To simplify the Frontera decision on whether to JV or go at it alone:
If they go at it alone and drill the low risk, high reward Kawa prospect and then farm out after success - CGX / Frontera shareholders are looking at the highest upside scenario. Like Apache, the future operator will have to pay the premium. + US $8.00 CGX share price minimum - game changer for Frontera, de Alba, etc.
If they farm out prior to drilling Kawa - the upside in a success case diminishes.
The spread between both scenarios is what Frontera is evaluating. I am sure they are putting that pressure back on their prospective JV partners and asking them what are you willing to pay now vs what you are willing to pay after success?
Look, these major and large operators know what's on CGX licenses. They know exactly what Kawa represents along with the other 4 billion of resources on Corentyne alone. They are also aware that Frontera is willing to drill the Kawa prospect on their own to validate and secure a premium as part of a potential farm in transaction and narrow the spread.
We have already seen this same scenario play out with the Total-Apache transaction in Suriname. Perhaps a higher risk on that transaction as the santonian and that particular Eastern part of the Guyana-Suriname basin had yet been derisked and Total wanted to see the data before they paid up.
Flexibility and options are what you want in any negotiation. Frontera/CGX have clear options. They are moving forward, as stated by De Alba, to "maximize long term value" for shareholders.
Once in a lifetime opportunity here for us and Frontera. De Alba is not looking at increasing the value of his shares in dollars - he is looking to unlocking tens of dollars for the share price of CGX and Frontera.
No rush here - if need be - let's drill the well - get the data - then negotiate.