Investors in CGX had a roller coaster of a ride on Monday as they saw the share price tumble from US 63 cents to as low as 46 cents in only a few hours on the back of news that the first of On-Energy's drill sites in Berbice had been abandoned.
The bulk of the trades happened before a statement was issued by the company - which only partially helped to stop the slide- , prompting concern that investors were acting upon information not widely circulated. Local newspapers only reported recent developments in their Monday editions. But in the first hour of trades on the Toronto exchange the price had dropped from 63 to 50 cents amid the heaviest trading of the day.
After the CGX statement came out at 9.43 am the price dropped to .46 and then slowly recovered to .58 by 12.30 pm before tapering off to end the day at .55. A total of 980,700 shares traded hands. As of yesterday morning shares were trading at 48 cents.
Shares had been bumping around the 20 to 30 cents rage for months after CGX's rig was forced to leave Guyanese waters by Surinamese gun boats but on news of the on-shore initiative had risen steadily reaching a high of US$1.00 earlier this year. It had then declined in recent months to settle in the 60 - 70 cents range.
CGX's CEO Kerry Sully talking from his Vancouver office on Wednesday said there was nothing substantive behind the heavy trading. "I think we can expect ups and downs in the price as the drilling goes on and we will probably see a recovery." He noted that the press statement had been in the Toronto Stock Exchange system before trading began but was delayed.
He called the abandoned Yakusari site as the highest risk/low probability location of the four to be drilled but one that potentially covered a very large area. With the shallowest drilling range it also offered a good exercise for the team before the deeper wells.
He said each location is mutually exclusive and chosen for specific reasons. He did confirm that some gas was found using pretty sensitive equipment but for a practical definition 'no'. Sully explained that as drilling continues there may be bubbles of gas released and there could even be flares as it is burnt off, lasting 10 to 15 minutes.
Sully said he remains pretty excited over the drilling programme and added that the project was a few days under budget.
Despite a share issue which raised US$727,500 and then a rights offering which raised US$8.5M, shares are not traded on the Guyana stock exchange out of concern they are too speculative. "This is a high risk investment. It's not recommended for widows and orphans," observed one analyst.
A number of local institutions and wealthier individuals sunk funds into what is essentially a punt but one that could pay off 10-fold if oil were to be found in commercial quantities. Those not able to get in on the rights issue and a number of Guyanese living in Canada had invested in CGX.
Hopes of an oil strike had been bolstered over the weekend after Prime Minister Sam Hinds was quoted as saying the chances of finding oil had increased to one in three rather than one in ten.
On-Energy director, Edris Dookie said he did not know what the PM was referring to. He added that there might have been some "lighter fractions coming to the surface, some sort of migration taking place, I don't know....there were modest indicators but nothing to write home about." He said the team got some very good information from the well and now have a better understanding of what is happening beneath the ground but "we are basically wildcatting in a 800,000 acre concession." He said he would not lose too much sleep over the latest developments and he remained as confident as before.
Dookie denied the suggestion that Yakusari was the best shot of the four locations and explained that a decision was made to start drilling at the site farthest from the bond and work towards it rather than going back and forth. He said they had hoped to go to the Albion site but some bridges in the area need fixing, so Hermitage, around the No 19 village on the Corentyne, was chosen and drilling could start late next week.
As for the markets he said that's how they react. But he said from day one he had said this was a high risk venture.
The CGX release stated: "CGX Energy Inc. and its 62-per-cent-owned Guyanese subsidiary ON Energy Inc. report that its Yakusari well, located onshore Guyana, was drilled to a depth of 2,901 feet. After examining electric well logs, a decision has been taken to abandon the well. This was the first well of a four-well program. During the next two weeks, the well will be abandoned, and the drill equipment moved to Hermitage, a well with a target depth of approximately 6,200 feet.
Kerry Sully, president of CGX and chairman of ON Energy, stated: "From an operations viewpoint, we've learned a lot about the challenges of importing an entire industry into a country yet to have an oil industry. Of the four locations, Yakusari was located the farthest from our storage yard and the farthest from the coastal highway. Methodical preparation of our access road and lease location allowed continuous operation during the rainy season, which fortunately was modest by Guyanese standards. We will now integrate the geological information into our geological model to assist us in future exploration. We look forward to the results from the next three locations."