Canada’s Frontera Energy has signed an agreement to farm into a pair of shallow-water blocks off Guyana held and operated by CGX Energy, a deal that will see Frontera help finance drilling costs there.

Frontera is set to acquire a 33.33% working interest in two blocks—Corentyne and Demerara, both adjacent to ExxonMobil’s prolific Stabroek block—and pay out a $33.3 million signing bonus to the CGX subsidiary.

CGX would still operate the blocks, with help from Frontera, the company said.

The Toronto-listed CGX last December renegotiated its work commitments in both blocks, relinquishing 25% of acreage in both blocks to the Government of Guyana.

The company has been on the hunt for a joint venture partner since at least 2015, after CGX received a deadline extension to spud wildcats in both blocks.

The agreement remains subject to negotiation, customary conditions and regulatory approvals from Guyana’s government.

Frontera is the new name for the Latin American independent previously known as Pacific or Pacific Rubiales following a reorganisation last year. In addition to the push into Guyana, the company holds a diversified portfolio with more than 30 blocks in Colombia and Peru.

"With the Frontera joint venture, CGX will be positioned to accelerate development of the Corentyne and Demerara blocks, CGX's two largest offshore concessions. We plan to raise additional capital on a basis that will allow shareholders to participate,” CGX executive chairman Suresh Narine, said in a statement.

Additionally, Frontera will also pay one-third of applicable costs and another 8.333% of CGX’s direct drilling costs for initial exploratory commitment wells in both blocks, the company said.

The shallow Corentyne block spans 1.13 million net acres. The exploratory well, called Utakwaake, must be drilled by 27 November 2019 with an additional well expected on the same date in 2022.

The first exploration well must be drilled by 12 February 2021 in the smaller Demerara block which covers 750,000 net acres. Another exploratory well is expected by 12 February 2023.

"Offshore Guyana has emerged during the last few years as one of the most exciting exploration areas in the world. CGX's offshore exploration blocks have been significantly derisked by exploration activity in the basin to date and contain multiple play types which offer significant opportunity,” Frontera chief executive Richard Herbert said in a statement.

“Once executed, our farm-in agreement with CGX will give the company a direct interest in the significant exploration potential of both the Corentyne and Demarara blocks.”

CGX will also repay Frontera an estimated $17 million of debt that is currently in default and owed to Frontera.