Jan 3, 2022·edited Jan 3, 2022Liked by Dave Messler
I think of CGX Energy as a subsidiary of Frontera Energy. In terms of exposure to the well results, Frontera Energy is the far better bargain (~88%). It is still cheap based on conventional onshore production. EV/CFFO = 2.8; EV/EBITDA = 3.1; ND/CFFO = 0.3; trades at 45% discount to the aftertax NAV@10/share. Production should have grown about 4K boe/d since Q3 2021, and should incrementally increase well beyond 40K boe/d in early 2022.
While the JV has been slowly, carefully, steadily drilling to depth, Frontera has been making acquisitions in Colombia. It has the financial depth to follow through on this well and the next.
Hey Erik, you’re probably right-certainly about Frontera vs CGX. I haven’t has a chance to do much on Frontera so can’t comment intelligently further. It looks like you've done way more due diligence on them than I have.
I have question concerning risk vs de-risked BOE; with risked BOE @ 785Mn and de-risked @ 4.4Bn, doesn't that put the mean chance of success at ~18% of finding oil?
Also, knowing very little myself, looking at this source, the Kawa-1 location seems to not be at all in the same geographic trend as all of the other finds - would oil not travel/be in seams? https://www.fronteraenergy.ca/guyanaregionalmap/
The term “channel” is what we use. Imagine a downhill rushing manner of sedimentation. Velocity will tend to create parallel channels in fluid flow. That scenario could well describe why this site was viewed as “prospective”.
Have you been invested since August 2021 when you wrote this article https://oilprice.com/Energy/Crude-Oil/How-To-Capitalize-On-Guyanas-Oil-Boom.html ? Other investors have been giving percent chances of success - how can anyone possibly give a risk profile unless they are on the rig? Even on the rig, if they knew, announcements would be made.
I do appreciate that you make it clear this is a total gamble, but I wish there was more clarity. All of the DD I've read and I still can't really get a clear, definitive answer on why this is going to be successful other than there are other successful finds nearby, but that's a correlation, not causation.
Yes, I’ve been long the entire time. I’m not sure I totally understand your question. Until you drill it you can’t know for sure. Offset production is associated with success, as you say a correlation. If you’re looking for guarantees, upstream oil investments may not be for you. If I missed your point then please elaborate. Cheers
Essentially, other investors have been saying things like "there is a 80, 90% chance of success" but can we ever truly determine an objective figure to determine the odds of success? I don't know oil well enough to know whether or not we can draw conclusions from findings nearby. Also, in my other comment and the image in your own DD, we can see the Kawa-1 source is south of the seemingly straight line of oil fields - I imagine this must be due to something geographic in nature but I'd love to hear if I am way off the mark.
Not sure why you would cite the total revenue for selling 100 million barrels, as that does not account for field costs, government royalties, taxes, or the time value of money. Net present value would be a more relevant statistic. Shedrills calculated contractor NPV of $2.766 billion US per 482 million barrels, or $5.73 net present value per barrel of oil, much less than the $65/bbl you cite. I understand that explorers tend to be valued at around half of NPV, however.
Thanks for reading and commenting. That was a back of the envelope estimate that I probably should have put more thought into. Her estimate or mine, it's still transformative for CGX if it pans out. Hope you enjoyed it otherwise. Cheers and Happy New Year.
I think of CGX Energy as a subsidiary of Frontera Energy. In terms of exposure to the well results, Frontera Energy is the far better bargain (~88%). It is still cheap based on conventional onshore production. EV/CFFO = 2.8; EV/EBITDA = 3.1; ND/CFFO = 0.3; trades at 45% discount to the aftertax NAV@10/share. Production should have grown about 4K boe/d since Q3 2021, and should incrementally increase well beyond 40K boe/d in early 2022.
While the JV has been slowly, carefully, steadily drilling to depth, Frontera has been making acquisitions in Colombia. It has the financial depth to follow through on this well and the next.
Hey Erik, you’re probably right-certainly about Frontera vs CGX. I haven’t has a chance to do much on Frontera so can’t comment intelligently further. It looks like you've done way more due diligence on them than I have.
Thanks for reading and commenting. Cheers
I JUST DID SHORT WRITE-UPS OF BOTH:
Frontera Energy (TSE: FEC / FRA: 3PY3 / OTCMKTS: FECCF): Hit By Colombia Unrest But Sees Coming Profitability and Operational Improvements
https://emergingmarketskeptic.substack.com/p/frontera-energy-recently-hit-by-colombia-unrest
CGX Energy (CVE: OYL / FRA: GXCN / OTCMKTS: CGXEF): A Speculative Guyana Oil Small Cap Stock
https://emergingmarketskeptic.substack.com/p/cgx-energy-speculative-guyana-oil-small-cap-play/comments
I linked back to this article in my short write-up
CGX Energy (CVE: OYL / FRA: GXCN / OTCMKTS: CGXEF): A Speculative Guyana Oil Small Cap Stock
https://emergingmarketskeptic.substack.com/p/cgx-energy-speculative-guyana-oil-small-cap-play/comments
For more oil stocks: https://emergingmarketskeptic.substack.com/t/oil-stocks
I have question concerning risk vs de-risked BOE; with risked BOE @ 785Mn and de-risked @ 4.4Bn, doesn't that put the mean chance of success at ~18% of finding oil?
Also, knowing very little myself, looking at this source, the Kawa-1 location seems to not be at all in the same geographic trend as all of the other finds - would oil not travel/be in seams? https://www.fronteraenergy.ca/guyanaregionalmap/
The term “channel” is what we use. Imagine a downhill rushing manner of sedimentation. Velocity will tend to create parallel channels in fluid flow. That scenario could well describe why this site was viewed as “prospective”.
Have you been invested since August 2021 when you wrote this article https://oilprice.com/Energy/Crude-Oil/How-To-Capitalize-On-Guyanas-Oil-Boom.html ? Other investors have been giving percent chances of success - how can anyone possibly give a risk profile unless they are on the rig? Even on the rig, if they knew, announcements would be made.
I do appreciate that you make it clear this is a total gamble, but I wish there was more clarity. All of the DD I've read and I still can't really get a clear, definitive answer on why this is going to be successful other than there are other successful finds nearby, but that's a correlation, not causation.
Yes, I’ve been long the entire time. I’m not sure I totally understand your question. Until you drill it you can’t know for sure. Offset production is associated with success, as you say a correlation. If you’re looking for guarantees, upstream oil investments may not be for you. If I missed your point then please elaborate. Cheers
No, I think we are on the same page.
Essentially, other investors have been saying things like "there is a 80, 90% chance of success" but can we ever truly determine an objective figure to determine the odds of success? I don't know oil well enough to know whether or not we can draw conclusions from findings nearby. Also, in my other comment and the image in your own DD, we can see the Kawa-1 source is south of the seemingly straight line of oil fields - I imagine this must be due to something geographic in nature but I'd love to hear if I am way off the mark.
Not sure why you would cite the total revenue for selling 100 million barrels, as that does not account for field costs, government royalties, taxes, or the time value of money. Net present value would be a more relevant statistic. Shedrills calculated contractor NPV of $2.766 billion US per 482 million barrels, or $5.73 net present value per barrel of oil, much less than the $65/bbl you cite. I understand that explorers tend to be valued at around half of NPV, however.
https://www.reddit.com/r/pennystocks/comments/rca7qu/oil_boom_begins_and_guyana_drillers_cgxef_and/
Thanks for reading and commenting. That was a back of the envelope estimate that I probably should have put more thought into. Her estimate or mine, it's still transformative for CGX if it pans out. Hope you enjoyed it otherwise. Cheers and Happy New Year.