Anglo African Oil & Gas plc (AIM: AAOG), an independent oil and gas developer, notes the announcement made last week by Société de Maintenance Pétrolière (“SMP”) relating to the dispute between it and the Company’s subsidiary, Anglo African Oil & Gas Congo.
The Company takes this opportunity to provide fuller details of its claim against SMP, the rig contractor for wells TLP-103 and TLP-103C arising from the performance failures by the SMP102 rig (the “Rig”) to ensure there is no misinformed speculation in this regard.
In summary, the Company is informed by international counsel that its claim has merit and any success in this regard would enhance the Company’s cash position. The claim is a purely commercial matter that has no impact on the Company’s operations. It is within the Company’s control to bring the dispute to an end, however the directors believe it is in the best interests of the Company to continue pursuing the claim.
Current status of Claim:
- Following poor performance by SMP in the drilling of wells TLP-103 and TLP-103C the Company attempted to enter into negotiations with SMP to recover some of the cost overruns incurred by the Company. SMP refused to engage in such negotiations.
- The Company therefore launched legal proceedings in the Paris commercial court against SMP to recover costs of $3.1 million relating to SMP’s underperformance. The Company has not provided for the recovery of such costs in its cashflow forecasts for the upcoming work programme and accordingly any success in this matter would enhance the Company’s cash position.
- In making the decision to launch proceedings for costs against SMP it was considered significant by the Company that:
o It had maintained extensive, contemporaneous technical records of the failures of the Rig and the losses and delays that were caused;
o SMP had put forward no evidence of any nature to suggest that Rig performance was not an issue; and
o Advice from International counsel in London, Paris and the Congo was that the claim by the Company had merit.
- SMP has not launched any claim or counterclaim against the Company.
- Under the rules of the Paris commercial court, mediation is a normal step and the court in Paris has now set a date for a supervised mediation meeting in the Autumn.
- In support of the Company’s actions and to protect its position, the Company has
o withheld payment of SMP’s final invoice of approximately $650,000; and
o exercised a retention right over the Rig which remains at the Company’s Tilapia site.
- SMP has now retaliated by seeking a seizure order over the fixed assets located at the Company’s Tilapia site and one of the Company’s Congolese bank accounts. The grant of this order was announced by SMP late last week and its effect is to grant SMP security over no more than $650,000 worth of the Company’s fixed assets at Tilapia. The Company notes that:
o This order has had no impact on the operations of the Company.
o The order is over the Company’s fixed assets (which are jointly owned by the Company and SNPC, the state oil company) and crude in tank (which is jointly owned by the Company, SNPC and the Government) at Tilapia.
o The order has no impact on the Company’s licence.
o The Company maintains limited cash balances in the Congo and the blocking of one of its accounts there has had no operational impact.
o The granting of this order has no bearing on the merits of the claim launched in Paris.
- The Company is seeking the revocation of the order at a hearing in Pointe Noire this week on several grounds including that the equipment and oil at the site is the joint property of SPNC, the Government (in the case of the oil) and the Company, and therefore has been wrongfully seized. The judgment of the court may take a few days to be delivered. The Company has been advised that its application for the revocation of the order has merit.
- The Company has the financial means to pay SMP’s final invoice. Payment of the invoice would leave SMP with no further right to seizure of any of the Company’s assets. However, and in addition to the challenge to the seizure order, the Company continues, on advice, to believe that it is in the best interests of the Company or its shareholders to continue withholding payment as part security for the claim to recover costs of $3.1 million..
The Company will provide further updates in due course.
For further information please visit www.aaog.com
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