CGX Energy Inc V.OYL

Interpretation of the NR

[oldcompanyman]

Good morning gents,

The current state of the operations on Wei is very, very encouraging on several levels, so it is worth spending a few minutes on yesterday's news release.

The first point, as everybody will have noticed, is that there are hydrocarbon shows and that they are performing openhole logs now. Based on the depth of 15,400', to the best of my judgment they are still about 500-800' short of the next casing point (for the 16" liner) and for this very reason I find it really encouraging that they have stopped to perform logs (as opposed to drilling down to the casing point, which should have been their operational plan if they hadn't seen something that warrants this "early" logging). My guess is that they will drill down another 500-800' after they complete the current logging operations and set the 16" liner.

The second point, nearly as relevant as the hydrocarbon shows mentioned above, is that they already are at such a depth. When I compare that to my composite Excel file that I had compiled before Kawa based on Rushmore data of subsea exploration wells in that basin, they are in the top quartile in terms of depth vs time progress. The P50 depth that I had for today, the 2nd of March, was 11,200ft. So this tells us two things that are really good; first, that this team took on board all relevant learnings from Kawa and are now able to drill these formations to a speed very close to what is called the Technical Limit and second, a direct consequence of the first, is that there is a really good likelihood that they will finish the well under budget, with the corresponding positive impact on their finances too.

The third point, also not to be neglected for the remaining operations, is that this speed of progress confirms -confirm is a strong word without knowing operational details but at least really strongly hints at- the fact that the additional water depth from Kawa (nearly double) had the positive effects that I had been hoping for on the PPFG curve of the well, at least on the top sections. There is considerably less lithostatic pressure on the top layers and this has impacted positively on the pressure evolution so far to the depths that we reached. What will happen from now on will not be governed that much by these considerations, as we are going deeper but based on experience and gut feeling, my expectation is that on the Santonian we should encounter a more benign pressure regime than on Kawa, somewhere in the region of 15.5 ppg. This will greatly ease the drilling of this section and most importantly the data acquisition.

Last but not least, as an indication, I expect them to set the 16" liner at 15,900'-16,200'. I'm not able to give a date for it, as it will depend on the extense of the logging program and any openhole management issues they may encounter but it would be reasonable to think that this will be accomplished, conservatively, within the next 10 days. Thereafter, my guess for the 14" casing shoe depth is 18,200'-18,700' based on the somewhat blurry image that they have on their presentation (I printed it out on A3 and worked on it analogically, so there is some margin of error on these depths). For the 14" I would not like to give a timing guesstimate so far in advance, it will depend on a great number of unknowns on the Campanian in terms of data acquisiiton etc. But all one can safely say is that once the 14" is set, the real game will start, drilling 12-1/4" into the Santonian, with 2 contingency strings available.

I will comment on the rest in due time.

GLTA,

OCM

[Sparky5968]

Thank you for your analysis of the drilling progress OCM. Very encouraging indeed!

[Mat1791]

Thanks OCM Great post, "well" written, "well" understood, well, well, well... GLTA

[ljmorin]

Great to have you back OCM!!

[Stampeder]

Appreciate the insight and analysis.   GLTA