What happens Next?First, it will be interesting to see what happens today. I assume the halt will be lift by the open or soon after.. I own both stocks and agree with liquor on his basic premise that FEC who has been calling CGX a subsidary and has the options and warrants to go from about 76% share ownership to about 80% is disconnected from CGX.price wise.FEC has complete control over CGX. and producing a lot of $80+ oil as well as gas, And obviously CGX has just been producing more debt but got a great well out of the deal and share holders should be able to see a big pay day, maybe as soon as today if you want to take some profit and risk off the table.
FEC should be having an excellent Q1 with netbacks approaching $60 with $90 oil. In the Q3 $ report they had net debt of $115Mil and should be seeing large sums of free cash flow as they bring more wells on line increasing production..
CGX has no source of income and has been paper spending (borrowing from FEC) ball park of $666k a day on their share of well costs that was to take 75 to 85 days when it looks like it will take closer to 180 days. It is obvious who is paying that huge shortage. This is addition to the almost $50mm in short term net debt CGX was carrying on their Q3 financials.
I think FEC gains little by taking even more shares and believe they are far better off taking more of the concessions for the money owed them by CGX. I think it is in FEC's inerest to leave CGX a seperate majority owned subsidy. CGX is the only company with ties to Guyana, and as much as one might dislike Suresh, he is from there and sees to have the connections that no other company big or small has. I am guessing that by the end of this month, CGX will be somewhere in the range of $150mm in total debt. How much of the concessions would be fair to wiipe that clean? FEC bought 33% of the concessions for $33Mil a little over 3 years back.
I would think it more than fair that FEC gets half of the concessions now for what CGX owes them for Kawa as FEC was taking all of the $$ risk when CGX ran out of cash that raised for them by FEC likely by Dec..
Which bring up, what happens next to the M-1 well due to be spudded in the Demerara block by 2/11/2022? It does not look like any way that the Discoverer will be able to meet that deadline, that may be the next news. Did they get another extension since so much time and money was put into a successful Kawa-1 or what?
Hats off to the drill team, sounds like that all of the planning, high priced consultants, double checking seismic etc. and all of the top notch drill team was $ well spent.
I think one reason we are seeing this seemingly current price disconnet between the two companes is that almost 80% of CGX shares are tied up by FEC, leaving only a fraction left to trade. I would expext some CGX profit takng later today if it opens big, not sure with FEC as I totally agree it is undervalued.
In theory almost 80% of CGX's market cap is owned by FEC and where is that reflected in FEC's market cap?.
The current market cap of OYL is:
The current market cap of FEC is: