CGX Energy, the company that has been on a tear since we interviewed Dewi Jones (President and CEO) back in March, announced this morning that the High Court in Guyana has upheld the injunction they were seeking against Repsol in order to stop the Spanish integrated oil giant from farming-out a portion of the Kanuku offshore oil block in Guyana to Tullow Oil.
Readers familiar with CGX Energy (OYL:TSXV) will remember Kanuku by its former name "Georgetown" which the company has been fighting to get back after a dispute with partner Repsol YPF.
In 2012, after drilling a pair of prospective, technically challenging, but ultimately unsuccessful offshore wells, CGX says they made it clear to Repsol that they intended to continue with the Georgetown block (now Kanuku after being renamed by Repsol).
Under the terms of their contract, being the operator Repsol was responsible for maintaining the petroleum prospecting license (PPL).
According to CGX, Repsol let the PPL lapse without informing the junior explorer and then proceeded to re-acquire it under a 100% interest and subsequently farmed-out a 30% working interest to Tullow who was formerly a partner on the 2012 wells. A suspicious move.
In late 2013, CGX initiated arbitration against Repsol and was able to obtain an injunction from the Commercial Court of Guyana restraining Repsol from farming out the 30% to Tullow.
Today, the High Court in Guyana upheld this ruling giving the battered junior E&P hope that it can regain control of the block and try to re-drill the target they just missed hitting in 2012.
Prof. Suresh Narine, Co-Chairman of the Company, commented: "We view this decision as strong support for CGX Energy's rights in the Kanuku PPL and as the next step to regaining our participating interest in the acreage. A final resolution of this matter is in the best interests of not only CGX Energy, but also tangibly demonstrates the application of the rule of law in the very exciting Guyana-Suriname basin. CGX Energy has drilled the most exploration wells in Guyana and has extensive knowledge of the Guyana-Suriname basin. Furthermore, we worked diligently to meet all of the obligations with respect to our 25% participating interest in the Georgetown PPL and will continue to do so in respect of all petroleum prospecting licences in which we participate."
Professor Narine is a well-respected Guyana national who has many achievements in the field of energy and biofuels. In 2011 he received an award from Guyana for his contributions to Science and Technology in Canada and for his contributions in this field towards the development of Guyana. He is Co-Chairman of CGX with Serafino Iacono (co-founder and Chairman of Pacific Rubiales Energy).
Dewi Jones, added: "Since 2012, CGX Energy has spent approximately U.S.$130 million in exploration in the Guyana-Suriname basin with approximately U.S.$40 million relating to the acreage now known as the Kanuku PPL. CGX's total spend in the Georgetown PPL since inception has been approximately U.S.$60 million. Given the significant investment already made in this petroleum prospecting licence, we are hopeful that this matter will be resolved quickly in the best interest of all parties and for the overall benefit of the continued exploration in the basin."
The company also recently announced that they have completed a shallow hazard survey in order to acquire seabed conditions and drilling hazard information surrounding the location of its first commitment well on the Corentyne block. The survey covered an area of 3.5 X 4.5 km.
This is a necessity in order for CGX to determine the position and penetration of the HAKURYU-12 jack-up drilling rig which has been chosen to drill the company's first target.
CGX continues to have an open data room trying to secure a farm-out partner on one or more of these expensive offshore drilling programs. The company remains optimistic that they will be able to secure a partner prior to the drilling deadline of October 31, 2015.
Shares are up $0.01 or 2.2% to $0.46 at the time of writing.
Read the news release here: CGX Energy Announces Order from High Court in Guyana - Upholding Injunction against Repsol
Also read: CGX Energy shares up 100% since march, CEO update