CGX Energy in arbitration proceedings against Repsol
CGX Energy Inc yesterday announced that it will commence arbitration proceedings against Repsol Exploracion, S.A. (“Repsol”) in connection with the expiry of the petroleum prospecting licence relating to the Georgetown Block (the “Georgetown PPL”).
A statement from the Canadian company said that CGX is of the view that the terms of the joint operating agreement governing the Georgetown Block were still in effect when Repsol allowed the Georgetown PPL to expire and sought out a new petroleum prospecting licence covering virtually the identical acreage offshore in Guyana, now known as the Kanuku petroleum prospecting licence. CGX said that Repsol was aware of CGX Energy’s continued interest in the Georgetown PPL and “had an obligation to seek renewal of the Georgetown PPL alongside CGX Energy”.
On February 27th this year at a press conference in Georgetown, CGX Energy Inc said it was faced with a demand for US$15 million from Repsol, Tullow and YPF S.A. for its share of oil drilling costs from two failed wells in the previous year.
In a detailed press release, CGX said “In its Management’s Discussion and Analysis for the nine months ended September 30, 2012, the Company disclosed that as of November 26, 2012, the Company had received a default notice in respect of its Participating Share of joint account expenses for the Georgetown PA in the amount of US$11,500,000. On January 24, 2013, the Company was advised by Repsol as operator of the Georgetown PA that the total default amount had increased to US$14,939,626. The Company has negotiated a stay of any enforcement proceedings until March 22, 2013. The Company reports that the current default amount is significantly in excess of its cash on hand and, accordingly, the Company currently has insufficient funds to satisfy this obligation and other near term obligations.”
At the same press conference, CGX announced that it was entering into a private placement to raise CDN$35-40M which could see its fellow Canadian oil explorer Pacific Rubiales Energy Corp gaining as much as 70% of the shares in the company. The private placement was meant to enable it to meet its debts.
Searching for oil here since 2000, CGX saw two of its wells failing to hit commercial oil last year – one wholly-owned and the other as part of a consortium. It was the demand for around US$15M from the other partners in the consortium which triggered the private placement arrangement with Pacific Rubiales.
The 100 percent CGX-owned Eagle well was abandoned in May 2012 after it was found to be dry. This well cost the company over US$71 million. The company together with the other partners at the Jaguar 1 well abandoned this site for safety concerns. It was expected that the drilling at this site would have cost CGX some US$180 million.
In October this year, CGX Energy Inc said it was continuing to actively pursue strategic joint venture partners for all three of its Petroleum Prospecting Licences (PPLs) and has a technical data room open at its Houston office.
The Company said it was preparing to re-process a portion of its 3D seismic data set for the Corentyne Block, which should be completed by the end of the year.
In the meanwhile, the Company said then that it had granted Repsol Exploracion, S.A. permission to gather seismic data in portions of the Corentyne Block when acquiring a new 3D seismic survey in the Kanuku Block during the fourth quarter of this year. The data acquired in the Corentyne Block will be provided to CGX at no additional cost, CGX said.
During the third quarter, the release said that CGX Energy continued to focus on cost cutting to reduce the size of the Company to better reflect current operations. As a result of these initiatives, the Company’s general and administrative costs have dropped by approximately 30% on a per month basis, since April, 2013.