- Oil explorer FAR Limited has decided to reignite an old feud with ex-joint venture (JV) partner Pancontinental Oil & Gas (PCL)
- The dispute dates back as far as 2015 when the companies were working together at the Kenya L6 project
- FAR, via its subsidiary Flow Energy, issued a cash call for more than US$377,000 in 2015
- PCL disputed both the amount owing and the demand for cash in general
- Talks continued between FAR and PCL through early 2016, but there was no resolution and no further action was taken by either company until this week
- This happened when FAR issued PCL with further default notices for the amounts of the original cash calls, plus interest, totalling more than US$567,000
- PCL maintains it will dispute any attempt by FAR to recover the alleged shortfall, and according to PCL the companies have resolved to surrender L6
- FAR is yet to issue a statement regarding the stoush
- Currently, FAR is steady and trading for 1.4 cents while PCL is down a steady 33.3 per cent and trading for 0.1 cents
Oil explorer FAR Limited (FAR) has decided to reignite an old feud with ex-joint venture (JV) partner Pancontinental Oil & Gas (PCL).
Gloves come off
The dispute dates back as far as 2015 when the companies were working together at the Kenya L6 project, a potentially rich development in the Lamu Basin, lying just to the north of world-scale natural gas discoveries off the coasts of Mozambique and Tanzania.
At that time Far was the operating partner of the JV, with a 60 per cent share, compared to PCL’s 40 per cent for offshore operations. Milio International had also signed a farm-in agreement for the onshore portion of the operation, with a potential 60-24-16 split between Milio, Far and PCL respectively.
Due to civil unrest and security issues on the mainland in 2014, onshore operations had to be suspended as the area was deemed unsafe for work.
The dispute relates to ensuing cash calls issued by FAR to PCL in 2015.
Round 1
FAR, via its subsidiary Flow Energy, issued a cash call for US$377,801. Given Milio’s farm-in arrangements, PCL was theoretically only due to pay a 16 per cent share of any costs – but Pancontinental disputes even that reduced figure of US$60,448.
It claims it had already paid US$38,060 – representing a share of fees payable to the Kenyan Ministry which Pancontinental was prepared to pay – but disputed the remaining US$22,388.
Flow later issued a default notice for the outstanding amounts. PCL wrote to Flow on September 9 2015 disputing the cash calls and the default notice and requesting further clarification.
Talks continued between FAR and PCL through early 2016, but there was no resolution and no further action was taken by either company.
Round 2
No further action, that is, until this week. FAR issued PCL with further default notices for the amounts of the original cash calls, plus interest, totalling US$567,145.80.
Pancontinental claims it knows of no known reason the cash calls or the default notices could be valid, given no work has been done at L6 since the original dispute, and no operating committee meetings had been held. As far as PCL could tell the matter was essentially resolved.
PCL maintains it will dispute any attempt by FAR to recover the alleged shortfall.
Now, according to PCL, the companies have resolved to surrender L6.
FAR is yet to issue a statement regarding the stoush.
Given FAR’s current situation of being unable to secure credit for its JV operations at Sangomar, and the general climate of misery around the oil price crash, the cash grab does have a whiff of desperation about it. Even given the relatively paltry amounts in dispute, it’s a tad mysterious as to why FAR would be pursuing a small, old, disputed debt on a now-dead project.
At 1:15 pm AEST, FAR is steady and trading for 1.4 cents while PCL is down a steady 33.3 per cent and trading for 0.1 cents.