Gulfsands Petroleum Plc (“Gulfsands” or the “Company”), the AIM listed oil and gas exploration company (AIM:GPX) with activities in Syria, Morocco, Tunisia and Colombia, provides the following update on the Rharb Petroleum Agreement (the “Rharb Agreement”)
The Rharb Agreement covers the Rharb Centre and Rharb Sud permits and is between the Office National des Hydrocarbures et des Mines (“ONHYM”), the state oil company of Morocco, and Gulfsands Petroleum Morocco Limited (“GPML”). The extension period of the Rharb Agreement under Amendment No.2 to the Rharb Agreement commenced on 10 July 2009 for 5 years and was subsequently extended to 9 November 2015 (“Extension Period”).
Gulfsands recently submitted a request to further extend the Rharb Agreement for a period of 2 years to allow the Company to appraise the gas discoveries made in 2014/15 (the “Extension Request”).
On 30 November 2015, the Company received a response from ONHYM, dated 26 November 2015, advising that the Extension Request was not possible and furthermore that:
- GPML will forfeit its $1.0 million in restricted cash held as a performance guarantee in relation to its minimum work obligation under the Rharb Agreement;
- ONHYM is seeking a penalty equal to the estimated cost of the Minimum Exploration Work Programme (as described below) of the Extension Period less the costs actually incurred in respect of Exploration Work required; whereby ONHYM is claiming a sum of $7.5 million; and
- ONHYM will also, by separate request, seek the outstanding amount under the training obligation of the Rharb Agreement.
Under Amendment No.2 of the Rharb Agreement, the Minimum Exploration Work Programme included an obligation to drill 9 exploration wells; with the estimated cost of the entire Minimum Exploration Work Programme stated at $15 million. Since January 2013, GPML has drilled 6 exploration wells and spent more than $26.7 million on exploration activity on the Rharb permits.
As at 30 June 2015 the Company reported a carrying value of its exploration and evaluation assets in relation to the Rharb Agreement of $29.3 million. As part of the preparation of its annual report and accounts for the 12 month period ending 31 December 2015, the Company will consider impairing the full value of these assets.
Alastair Beardsall, Gulfsands Chairman said:
“We are disappointed not to have been given an extension to appraise the gas discoveries made in 2014/15. With regard to ONHYM’s various claims for financial sums and penalties, we will be seeking legal advice on these matters.”
Gulfsands Petroleum Plc
Alastair Beardsall, Chairman
+44 (0)20 7024 2130
Cantor Fitzgerald Europe
+44 (0)20 7894 7000