Update re East Ghazalat concession
Independent Resources plc
Update re East Ghazalat concession
Independent Resources plc ("IRG") (AIM:IRG) and Nostra Terra Oil and Gas Company plc ("NTOG") (AIM:NTOG) make the following announcement in relation to the East Ghazalat concession in Egypt ("East Ghazalat").
In this announcement:
"JV" means the joint venture between IRG and NTOG.
"North" or "NPIC" means North Petroleum International Company, a subsidiary of China ZhenHua Oil Co. North is the owner of the other 50% interest and operator in East Ghazalat (China Zhenhua Oil Co. is the wholly owned oil and gas arm of China North Industries Corporation ("NORINCO"), a Chinese state-owned company).
"JOA" means the joint operating agreement between North and the JV which governs East Ghazalat.
North has served a notice of default pursuant to the terms of the JOA in respect of unpaid cash calls for November and December 2015, which the JV estimates to be approximately $750,000. These cash calls had previously been rejected by the JV on the grounds that they were manifestly excessive, contained no justification for the level of funds demanded and failed to reflect the issues already raised by the JV under the JOA in relation to the 2015 budget.
The JV had previously served notice on North pursuant to the relevant provisions of the JOA that it intends to undertake detailed audits of the accounting and procurement processes, actual accounts, records and inventory for East Ghazalat for the 2013 and 2014 financial years.
These audits are in pursuance of the JV's policy, as previously stated on 15 October 2015, of seeking to improve operating margins through cost reduction initiatives and to implement further reserve enhancement opportunities in a disciplined and rigorous manner.
The JV believes that the service of the notice is in part in response to the submission of the audit request by the JV and the challenges it has been posing and continues to pose to North in its capacity as operator.
In addition, on completion of the acquisition, the right to recover under the unresolved audit for the 2012 year undertaken by TransGlobe was transferred to the JV. In the JV's view, proper process has not been followed by North or its predecessor as operator in response to the 2012 audit report served on them in early 2013. Accordingly, the JV believes that the overcharges identified in that audit, some $575,000, have become payable by North and it is seeking resolution of this matter urgently.
The JV believes and is advised that North are in substantial breach of the JOA inter alia in terms of the preparation approval and revision of budgets, in the provision of requested information to the JV (to which it is entitled under the JOA), in the provision of inadequate information to substantiate their cash call and in failing to declare or manage certain significant conflicts of interest to the detriment of the JV. In an environment of low and unstable oil prices the JV has challenged the budgets and the levels of expenditure being incurred but North have refused to respond despite their duty as Operator to do so under the JOA.
Accordingly, the JV has served a full and detailed Dispute Notice as required by the JOA on North. The JOA provides for arbitration in London under UK law if the dispute cannot be resolved.
The JV continues to be entitled to its share of the revenues from East Ghazalat, both past and future. The JV is continuing to progress arrangements for prompt invoicing and payment of its share.
The JV believes that a robust response and challenge to North both through the Dispute Notice and the audit process will result in greater control of overheads, better planning and management of operations in the field and the recovery of overcharges from the 2012 audit and the significant scope for recovery of overcharges from the proposed audits.
Further announcements will be made in due course.
For more information, please visit www.ir-plc.com or contact:
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Greg Coleman |
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Independent Resources plc |
020 3367 1134 |
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Mark Taylor |
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Panmure Gordon (UK) Limited |
020 7886 2500 |
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(Nominated Adviser & Joint Broker) |
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Oliver Stansfield |
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Brandon Hill Capital |
020 3463 5000 |
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Jonathan Evans |
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(Joint Broker) |
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Simon Hudson |
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Tavistock Communications |
020 7920 3150 |
This information is provided by RNS
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