CGX Energy Value Proposition 11/30/2021$CGXEF $OYL.V Value Proposition Summary Shares Outstanding = 334.5 Million
Value of Berbice Deepwater Port (21x EBITDA 2025, 65% Profitability) = US$887 Million or $2.65 per share
Value of Corentyne License Based on APA:TTE Farmdown = US$1.570 Billion or $4.69 per share
NPV10 of Liza Like Discovery @ $65/bbl = US$1,814 Billion or $5.42 per share
NPV10 of 3 Liza Like Discoveries @$65/bbl = US$4.816 Billion or $14.40 per share
Note these are incremental values so by year 2025 if the port achieves revenue expectations and they have a single Liza Like Discovery w/ no uplift for additional exploration the stock could trade at $2.65 + $5.42 or $8.07 fairly valued.
These numbers aren't intended to be used as price targets...simply to give a flavor of the magnitude for potential share price uplift.
Risk:Reward Logic & Assessment Discovery potential in the Guyana-Suriname basin remains significant with multiple prospects yet to be found. Since 2015, more than 10 billion boe resources spanning 18 prospects have been discovered in the Stabroek Block and three other discoveries in the Orinduik and Kanuku Blocks by other companies offshore Guyana. So far, Apache
has made four discoveries at Block 58 while Petronas
has made one at Block 52 offshore Suriname. Rystad Energy’s upstream team suggested in March 2021 that “close to 300 MMboe has been discovered on average for each exploration well (wildcat and appraisal)” drilled in Guyana in the last 6 years. That quality of exploration potential should deliver profound market upside for a company the size of CGX Energy trading at US$1.01 per share OTC and having only US$338 Million market cap at time of my writing.
According to
Westwood Global Energy Group, “licenses in emerging plays were valued, on average, 1.5 times higher than those in frontier plays and almost 3.5 times those of mature plays over the last five years.” Companies will pay a premium to access emerging plays which have preferential terms and significantly less risk than frontier exploration and where pool sizes are much larger than in mature plays. The largest farm-out exploration deal in the last 5 years was for the Guyana-Suriname basin in 2019 associated with Maka Central, where Total (NYSE:TTE) accessed the prospect via a 50% WI and operatorship farm-in to Apache’s Block 58. The Maka-1 well was still being drilled but preliminary results had confirmed the prospectively of the Suriname license. To close the joint venture deal, Total paid Apache a $100MM signing bonus, reimbursed Apache its share of past costs for its first three exploration wells and could pay more depending on further developments. Apache said it would also receive $5 billion of cash carry on it’s first $7.5 billion of appraisal and development capital along with other considerations. Total will eventually become the operator of that block. Total stated in their December 2019 press release that “
Cost of carry and payments would then represent an acquisition cost of around $2 per barrel.”
CGX Energy’s Corentyne Block is comparable exploration acreage to adjacent Suriname Block 58 and has an independent mean resource estimate of 4.4 billion boe Unrisked and 785 MMboe Risked. Using the Apache/Total deal as a benchmark, one might venture that a farminee would pay US$1.570 Billion or $2/bbl x 785 MMBoe to purchase their full WI in that specific license at any time before the Kawa 1 well results are known. If you couple the Demerara block in the value proposition, the deal supports a market value of US$1.768 Billion for the offshore license asset value prior to announcing a single discovery.
At this time, the Kawa and Makarapan prospect specific resource assessments are not publicly available so it’s impossible for the street to meaningfully predict their volumes and risk profiles. In order to get a flavor of what the value of a single commercial success might look like, I leveraged the Liza field development plan presented by the University of Trinadad and Tobago in SPE-191239-MS at the SPE Trinidad and Tobago Energy Resources Conference and built a cashflow model. The model includes 1% Royalty, 53% Government Take of Profit Oil, and 75% Cap for Cost Recovery in any given year. The results and price sensitivity are as follows:
| Oil Price ($/Bbl) | 50 | 65 | 80 |
| Gas Price ($/MMBtu) | 2.50 | 2.75 | 3.00 |
| Cumulative Oil Production (Mstb) | 482,713 | 482,713 | 482,713 |
| Cumulative Gas Production (MMscf) | 3,356,540 | 3,356,540 | 3,356,540 |
| Cumulative Total Production (Bcfe) | 1.042 | 1.042 | 1.042 |
| Oil Revenue (US$MM) | 24,136 | 31,376 | 38,617 |
| Gas Revenue (US$MM) | 8,069 | 8,875 | 9,682 |
| Total Field Revenue (US$MM) | 32,204 | 40,252 | 48,299 |
| Total Field Cost incl Opex & Abandonment (US$MM) | 9,061 | 9,061 | 9,061 |
| Total Field NPV10 (US$MM) | $4,564 | $7,016 | $9,467 |
| Government NPV10 (US$MM) | $3,077 | $4,309 | $5,566 |
| Contractor NPV10 (US$MM) | $1,487 | $2,707 | $3,901 |
| CGX Energy NPV10(US$MM) | $996 | $1,814 | $2,614 |
| Contractor ROR | 16% | 21% | 24% |
Economic Analysis of Liza Like Field Development Deepwater Guyana It should also be noted that a single discovery will further derisk the other 30+ prospects within CGX Energy’s Guyana acreage. Once they find a commercial field, they will likely find many. If they can discover 3 Liza like fields over the next 4 years, the NPV10 of those fields coming online by 2029 at $65/bbl is US$4.816 Billion for CGX Energy.