Frontera's End Game?Realistically, what are they doing with CGX long term? I think that's the end answer no one knows and perhaps they do not even know either. Without big pockets (>$10B), not a single drop of oil will ever be produced from CGX lands, so what does Frontera ultimately do at this point?
Yes, to pay for Kawa-1 and upcoming Wei-1, Frontera could do another rights offering (say another 150 CGX million shares @ $2.50 CAD). This would generate $375MM CAD and ensure all CGX obligations for 2022 are covered and then we play the same guessing game again next spring 2023.
But really, what does any additional CGX shares do for Frontera at this point? If they cannot make a JV deal right now given the discovery at Kawa-1, all they are doing is just doubling down and hoping a JV deal comes aboard after Wei-1 (at which there is no guarantee). If they cannot find a big partner to fund these offshore fields right now, Frontera will just be holding a bunch of useless CGX shares for years to come (since it would be near impossible to offload any meaningful amount without crashing the share price). They would in essence be like most small operators in the Canadian oil sands or North Sea... lots of assets, but no real money to produce them.
It is kind of funny... Frontera has played hard-ball with CGX all these years regarding funding and rights offerings, given that CGX had little financial leverage. Would not suprise me 1 minute if the same hard ball games are being played right now with Frontera.
Perhaps that is why the CGX share price has not sky-rocketed well above $5 since the discovery? It does absolutely nothing for Frontera short-term and in fact they need the price to stay relatively low since additional rights offerings are a strong possibility.
Either way, it will be interesting how everything unfolds in the coming weeks/months.