RE:RE:Frontera's End Game?Dirk, some replies to your questions:
1) "if they farm-out part of their interests and raise cash that way would it not finally give them revenues, cash flow and income?"
- No, if CGX gets any JV deal, the money likely would be a one-time transaction (kind of like selling your house... one-time deal and then you do what you want with the cash). I know many people on this board believe an JV partner will also pay any future CGX related costs associated to a development, but I am more doubtful. Why... Even a 10-15% CGX retention of working interest (vs current 66%) would still mean over $1 Billion in future costs... why would any company be willing to pay these costs and then not be able to capture the full profits?
- Like someone said yesterday, big companies do not get rich by paying premium prices for oil (especially when the can negotitate from positions of power)!
- My hope is CGX will get say $1-1.5B in return for say 35-45% of their current working interest (currently at 66%) and thus they can actually contribute to the costs associated with future exploration-appraisal drilling and ultimately FID of a major project. I know tons of people probably think I am being crazy with my assessment. With that, more than happy to hear other scenarios.
2) "discovered reserves".
CGX DOES NOT have reserves. They have discovered resources (contingent currently). Massive difference. Please look up the definitions online.
https://www.spe.org/en/industry/petroleum-resources-classification-system-definitions/
- In short, to move these contingent resouces to reserves, they need to do additional appraisal drilling (so they can properly assess the size of the different reservoir pools). Look at Apache and their recent appraisal wells... big reductions in net pay vs the original exploration well.
- More importantly, serious capital is required to produce these resources and is a massive component of any reserve classification.
- End of day, CGX/Frontera are many years away from moving any resources in Kawa to either 1P (proved) or 2P (proved plus probable) reserves. This will require capital far more appraisal drilling and ultimately capital to drill all the production wells/FPSO.