CGX Energy Inc, the Canadian petroleum exploration company operating in Guyana, has entered into an agreement that will lead to the farm-out of 5 percent of its 25 percent participating interest in the Georgetown Block to its partner, Repsol Exploración S.A.

The term farm-out refers to the turning over of an aspect of a business in return for the payment of a fixed sum and the CGX deal is, however, subject to approval from the Government of Guyana.
If approved, effective, from September 1, 2012, would be Repsol Exploración S.A. (20 percent) as operator (up by 5 percent), CGX Resources Inc. (20 percent), down by 5 percent, Tullow Oil plc (30 percent) and YPF Guyana Limited (30 percent).
CGX had, earlier this year, experienced a cost overrun of US$16M in its drilling of the Eagle-1 well in the Guyana/Suriname Basin, which turned out to be a dry hole.
The Eagle-1 well was, initially, budgeted for 60 days of drilling but suffered weather delays and mechanical issues which extended operations for approximately an additional 30 days.
The initial cost estimate for the Eagle-1 well was US$55M. However, eventually, the estimated cost in May was US$71M.
That month, after the exploration failed, CGX announced that Pacific Rubiales Energy Corporation, another Canadian oil company, had advanced it US$30M to meet its immediate financing needs following the failure of the Eagle-1 well.
In late September, CGX officials disclosed that the company was negotiating agreements with third parties that might lead to farm-outs on one or more of its petroleum prospecting licences (PPLs), so that it can concentrate exploration activities in others.
A release in September said Mr. Kerry Sully, President and Chief Executive Officer (CEO) had revealed that, under one agreement, the CGX will receive minimum non-refundable payments of US$4M in consideration of granting the third party an opportunity to receive and analyse seismic and well data.