CGX ENERGY (V-OYL)
.87 -0.03

We simply describe it as a “lottery ticket” these days as

CGX Energy delayed yet again, will finally be drilling their

properties offshore Guyana in a couple of months.

We were very pleased to have Kerry Sully presenting at

our “Beer and Pizza” gathering last Friday, but just before

that little event, Bloomberg, the network that virtually all brokers

over North America and much of the world follow, did a

feature article on Tullow Oil and how they are hoping to discover

oil just offshore South America where they’ve been

discovering it offshore Africa where they have made some

truly monumental discoveries.

For a look/see at the article, just click here and give it a

good read, you’ll notice little CGX is mentioned in the article

that features mainly big, big cap companies. As we mentioned,

it’s a lottery ticket...as one analyst tells us that within

a year, CGX Energy will either be a home run or a huge miss.

http://www.bloomberg.com/news/2011-02-25/tullow-geologistgambles-

on-70-billion-oil-find-by-chasing-atlantic-drift.html

It is a little bit technical, but we do a quick Q&A with Kerry

Sully and for those of a geological bent or those who want a

learn it, might enjoy the following Q&A.

Dave: After years of delay caused by border disputes and

gunboats, the rig is finally back in the basin. Fill us

in on the drilling schedule, and what each well

means to CGX.

Kerry: Offshore French Guiana, Tullow will be drilling their

Zaedyus Prospect to the Turonian using an ENSCO

semi-sub drill-rig starting in March. They estimate

the field may hold 700 million barrels valued at

more than $70 billion, and is a mirrored-twin to their

~ 1 billion barrel Jubilee discovery offshore Ghana.

CGX views the biggest risk in this well to be mature

source because of the lack of well control in this

area. But if successful, our Turonian targets will be

further enhanced, with one “mirror” from West Africa,

and a second angled from the south – it will be

as good as being in a House of Mirrors. The world

will see targets everywhere.

Kerry: In their press conference, Murphy were very upbeat

as to what they have learned from the dryhole

in the Turonian at Caracara. The target was

better than prognosis (so either thicker or better

porosity) but didn’t have oil shows. CGX interprets

Caracara to be a long way east of the mature

source that is under our licenses, so to be

successful, Murphy needed significant lateral

migration. They didn’t get it into the Turonian, but

did in the overlying shales where there were significant

oil shows, confirming lateral migration is

working at the Tertiary level. Their next target is

being drilled into a Paleocene fan in the Tertiary

that is within these shales, so they now view migration

and seal as being low-risk elements for

Aracari. Because it is 300 km from our targets, it

wouldn’t change our probability of success, but

would attract global interest to this Basin. It

would also confirm that the Tertiary, including our

Eagle Shallow Eocene fan, contains significant

targets.

Dave: They’ve been waiting for over 2 months to move

the Atwood Beacon jack-up rig to their second

location. How does this affect your schedule?

Kerry: To move the rig in a wet-tow requires a swell of

less than 5 feet. The seas are roughest in this

basin from November thru February, but would

normally have brief windows for a move. Now

that we are into March, there will be a lot more

opportunity. This will set our schedule back by

about 3 months for drilling of Jaguar to start in

Q3. Once Murphy starts, that well should only

take a month to drill.

Dave: But then the Beacon will go to drill for Inpex?

Kerry: Yes, and we view that as a very material well for

us. It is targeting a third play type, an Albian reef.

This is the new play type that OGX has been very

successful with along the shelf margin in Brazil.

We have 4 Albian leads on our licences that

would be derisked by an Inpex discovery. The

Inpex well will take about 3 months to drill.

Dave: And then it’s finally your turn?

Kerry: Yes but by then our shareholders will have had 2

shots on goal, with 2 more shots to come. Jaguar

is a Turonian test where we are fully funded for

our 25% share with partners with Repsol, YPF and

Tullow, so we have major company endorsement.

Tullow estimate a resource potential of 700 million

barrels for Jaguar, so it too would be valued

at more than $70 billion.

We are still in discussion with potential joint venture

partners on our Corentyne License to drill

Eagle shallow to test Eocene and are looking at

alternate rigs. We have the added benefit of

watching the Albian being drilled on one side by

Inpex, and the Turonian being drilled on the other

by Repsol et al, with prospects and leads in both

of those formations in the Corentyne License. We

believe this region will be opened up as a major

oil basin this year.