CGX Energy (CVE: OYL / FRA: GXCN / OTCMKTS: CGXEF): A Speculative Guyana Oil Small Cap Stock

by

Toronto based CGX Energy (CVE: OYL / FRA: GXCN / OTCMKTS: CGXEF) is focused on the exploration of oil in the Guyana-Suriname Basin and the development of a deep-water port in Berbice, Guyana. However and despite having an oil joint venture with larger Canadian group Frontera Energy Corporation (TSE: FEC / FRA: 3PY3 / OTCMKTS: FECCF), CGX Energy would be a highly speculative a small cap stock with considerable “going concern” uncertainty. (See: Frontera Energy (TSE: FEC / FRA: 3PY3 / OTCMKTS: FECCF): Hit By Colombia Unrest But Sees Coming Profitability and Operational Improvements)

Nevertheless, Guyana has vast natural resources (forestry, mining and oil and gas) and is the only English speaking country in South America with a legal system based on English common law and its corporate system based on the Canada Business Corporations Act. Since 2015, oil companies operating off its coast have found more than 10 billion barrels of recoverable oil and gas – a tenth of the world’s conventional discoveries (Guyana Is Becoming A Top-Tier Oil Producer and Factbox: Offshore discoveries turn tiny Guyana into oil hotspot).

In addition, the WSJ recently mentioned the stock in an article (As Oil Giants Retreat Globally, Smaller Players Rush In) about how the oil majors are still developing a handful of big oil and gas fields in Latin America. But increasingly, it is smaller, little-known oil firms who are moving into risky lesser explored regions and getting the fossil fuels out of the ground. These smaller oil players have lower costs and can quickly recoup their investment before the next oil price downturn.

OVERVIEW:

  • CGX Energy is a Canadian-based oil and gas exploration company focused on the exploration of oil in the Guyana-Suriname Basin and the development of a deep-water port in Berbice, Guyana. CGX has been operating in Guyana since 1997 and is widely acclaimed as Guyana’s “Indigenous Oil Company;” maintaining strong relationships with the Government and People of Guyana.
  • CGX Energy operates the Corentyne block under a Joint Operating Agreement (JOA) with Calgary based Frontera Energy Corporation. Specifically, CGX Energy’s wholly owned subsidiary, CGX Resources Inc. (CRI), holds 32% Working Interest (“WI”) of the Corentyne Petroleum Prospecting License (Corentyne PPL)
Image - Corporate Structure - August 2022
Corporate Structure
CGX Energy Deep Water Port Presentation – August 2022
CGX Energy Deep Water Port Presentation – August 2022

RECENT FINANCIALS / NEWS:

  • MD&A and Financials for the three months period ended March 31, 2023
    • The Company currently has no revenues, so its ability to ensure continuing operations relates to its ability to obtain necessary financing to complete the exploration and development of oil and gas concessions and the completion of its Berbice Deep Water Port project.
    • The Company recorded a net loss of $248,225 or $0.00 a share for the three months period ended March 31, 2023 compared with a net loss of $2,860,559 or $0.01 a share for the same period in 2022
    • The Company has a history of operating losses, as of March 31, 2023, had accumulated deficit of $320,817,166 (December 31, 2022: $320,568,941. The ability of the Company to continue as a going concern is dependent on securing additional required financing through issuing additional equity, debt instruments, sale of Company assets, obtaining payments associated with a joint venture farm-out, or otherwise. Given the Company’s capital commitment requirements outlined in Note 14. of the Interim Financial Statements, the Company would have challenges in meeting its operating requirements for the 12-month period from the balance sheet date. While the Company has been successful in meeting its working capital requirements in the past, (i.e. in April 2022 the Company was able to raise $35.0 million through the 2022 Convertible Loan, and in July 2022 signed the 2022 JOA Amendment securing funding for drilling the Wei-1 well), and although the Company believes in the viability of its strategy and that the actions presently being taken by Management will provide the best opportunity for the Company to continue as a going concern, there can be no assurances to that effect. As a result, there exist material uncertainties which cast significant doubt as to the Company’s ability to continue as a going concern.
  • Latest Oil Discovery Offshore Guyana May Not Be Commercial (OilPrice.com) May 2023
    • CGX Energy Inc and the Frontera Energy Corporation, partners in the Corentyne Block, this week said in their respective first-quarter results releases that the Wei-1 well on the Corentyne block was successfully drilled and oil was encountered.  
    • “It is not yet certain that the hydrocarbons encountered to date in the Well are yet sufficient to underpin commercial development on the Northern portion of the Corentyne block,” CGX Energy said in its press release.
    • The uncertainty of whether the discovery could be commercially viable is a rare setback for explorers offshore Guyana, which has turned into one of the hottest new exploration provinces for many companies, including U.S. supermajor ExxonMobil.
  • CGX Energy crashes after hitting water in Guyana project (Reuters) May 2012
    • Shares of CGX Energy Inc slumped 73 percent to a three-and-a-half-years’ low on Tuesday, after the oil and gas explorer said its Eagle-1 project in Guyana had water, and not oil.
    • CGX Energy spent C$71 million – C$16 million more than it had budgeted for – and spent 30 extra days to examine the commercial feasibility of the project, it said in a statement.

RECENT STOCK ANALYSIS:

  • CGX Energy: Do Ya Feel Lucky? (Energy Investor’s Research Substack) December 2021
    • There is no surer path to riches than running a major port of entry in a growth area like Guyana. Regardless of how the oil exploration turns out, this factor alone is enough to consider buying into the company at current prices.
    • Bottom-line: this is a very speculative investment case that regards a company that is essentially bankrupt, with no revenue, and a key investor who’s recently taken more shares for operating capital. It is the very definition of high risk. The otherside of that is high reward, the thesis for which we will also discuss. Grab a cup of coffee, and let’s dig in.
    • I think CGX presents a compelling investment case at current prices, depending on your risk tolerance. They have no real income at this point so usual financial metrics are unavailable.

KEY RATIOS:

1 YEAR CHART:

LONG TERM CHART:

ADDITIONAL RESOURCES:

Share

Subscribe Now Via Substack

new-logo

Disclaimer. The information and views contained on this website and newsletter is provided for informational purposes only and does not constitute investment advice and/or a recommendation. Your use of any content is entirely at your own risk and it is your sole responsibility to evaluate the accuracy, completeness and usefulness of the content. Seek a duly licensed professional for any investment advice. I may have positions in the investments covered. This is not a recommendation to buy or sell any investment mentioned.

Similar Posts:

Leave a Comment

This site uses Akismet to reduce spam. Learn how your comment data is processed.

Visit Us On TwitterVisit Us On FacebookVisit Us On LinkedinCheck Our FeedVisit Us On Instagram