Wessex Refuses to Pay Its Share of Cash Calls
Northern Petroleum Plc has received formal notification from Wessex Exploration PLC, the Company’s joint venture partner in the Guyane Maritime permit offshore French Guiana, that in an effort to conserve cash resources Wessex will not be paying its equal share of the latest monthly cash call and intends not to fund future cash calls until Wessex’s investment contribution in the ongoing work programme has reduced by up to £1.5 million.
Northern and Wessex have invested to date an equal share in Northpet Investments Limited, the joint venture vehicle which holds a 2.5 per cent interest in the Guyane Permit. The terms of the Northpet shareholders’ agreement signed in 2008 allow either party to elect not to fund its equal share of the costs of the venture at any time. In such circumstances the other party would have to fund the shortfall to avoid Northpet defaulting on the Guyane Permit and in doing so, increase their equity ownership of Northpet.
If Wessex elects not to fund up to £1.5 million of current and future funding as indicated, Northern has taken the decision to fund this shortfall and as a result Wessex’s interest in the venture will fall to approximately 44 per cent, with Northern’s interest increasing to approximately 56 per cent, resulting in an effective 1.4 per cent net interest in the Guyane Permit to Northern.
The final well of the current drilling programme is scheduled to reach total depth this quarter, after which a period of data consolidation and evaluation will take place throughout most of next year before Shell as operator tables the next stage of the exploration and appraisal work programme to the partners. At that point, Northern will decide the best way to realise the value for its shareholders from this asset.
Northpet owns 2.5 per cent in the Guyane Permit with Shell, as operator, holding 45 per cent, Tullow Oil holding 27.5 per cent and Total holding 25 per cent.
Keith Bush, Chief Executive Officer of Northern, commented:
“We believe the benefit of staying in the licence in French Guiana through the current well and data evaluation phase far outweighs the remaining cost of the programme. Once the data evaluation has been concluded we will decide on how the Company best realises value from the licence.”
Press Release, October 16, 2013