Predator Oil & Gas Holdings Plc (PRD), the Jersey-based Oil and Gas Company with operations in Trinidad, Morocco and Ireland provides, arising from a series of positive meetings in Trinidad held with stakeholders during the period 31 May to 3 June 2022.
· Initiation of a litigation process for the repayment of the FRAM Loan
· Recompense sought as a result of the termination of the approved Inniss-Trinity CO2 EOR project
· Further progress on rolling out multiple CO2 EOR projects
The following update on the Company’s position with regard to the loan receivable (the “FRAM Loan”) from FRAM Exploration Trinidad Ltd. (“FRAM”), a wholly owned subsidiary of Challenger Energy Group Plc (“Challenger”), in respect of the Inniss-Trinity CO2 EOR Project (the “CO2 EOR Project”). The CO2 EOR Project was prematurely and unilaterally terminated by Challenger on 1 August 2021.
Following the delivery by the Company of correspondence to FRAM on 23 March 2022 relating to the repayment of the Fram Loan and the settlement of other outstanding contractual matters under the Inniss-Trinity Well Participation Agreement (the “WPA”), the Company has failed to receive from either FRAM or Challenger any firm proposals to allow an amicable settlement to be reached.
Regretfully therefore the Company has decided to initiate a litigation process following the consultation trip made by the executive directors to Trinidad during last week. The first physical trip following the relaxation of COVID restrictions.
The scope of the litigation process will involve three areas where the Company is seeking to be recompensed as a result of the premature termination of the CO2 EOR Project by Challenger.
1. The FRAM Loan outstanding to the Company is £591,065 as of 31 December 2021.
The FRAM Loan is reported as a receivable in the Company’s audited Financial Statements for 2020 and identified as a contingent liability in Challenger’s 2020 Financial Statements.
On 20 April 2022 FRAM and Challenger refused in writing to comply with a request for information from the Company via its auditors that was necessary for its financial reporting of the FRAM Loan.
2. The Company is seeking full repayment of its project costs (the “Project Costs”) invested in the CO2 EOR Project under the terms of the WPA, which remains in place.
Under the WPA the Company has invested the minimum required commitment of US$1,500,000 (inclusive of the outstanding FRAM Loan).
The WPA provides for repayment of the Project Costs from 100% of the profits of enhanced oil production until repaid.
The Company has demonstrated enhanced oil production due to CO2 injection at Inniss-Trinity to a number of competent stakeholders in Trinidad on the basis of which new CO2 EOR projects have been initiated with the Company.
The WPA and its amendments together with the Inniss-Trinity CO2 EOR Project Proposal PRD25092019, which was reviewed and approved by all stakeholders and regulatory authorities, defined the duration of the Inniss-Trinity CO2 EOR Project.
Phase 3 of the CO2 EOR Project was entered into and approved by all stakeholders with the approval of the regulatory authorities in April 2021, on the basis of which the Company continued to invest.
Phase 3 facilitated up to 275 days of continuous CO2 injection with enhanced oil production through which the Company was confident of recovering its Project Costs within the near-term.
Unilateral termination of the CO2 EOR Project by Challenger without consultation with stakeholders and regulatory authorities deprived the Company of the mechanism to recover its Project Costs.
Accordingly the Company seeks redress for breach of the terms of the WPA.
3. The Company is seeking substantial consequential losses from Challenger under the WPA and arising from Challenger’s failure to facilitate the execution of Phase 3 of the CO2 EOR Project as defined in the approved Inniss-Trinity CO2 EOR Project Proposal PRD25092019. The Company’s pivotal role in executing the Inniss-Trinity CO2 EOR project has been widely recognised and accepted by stakeholders and regulatory authorities. The Company therefore was best-placed to make operational recommendations regarding the direction of the CO2 EOR Project. Challenger chose to unilaterally shut down operations without consultation and contrary to best industry HSE practice and without providing any technical justification.
As a result the Company lost its ability to potentially recover 853,000 barrels of oil from the AT-4 Block through expansion of the CO2 EOR Project. These oil resources were calculated in an independent reservoir engineering study made available to the regulatory authorities and previously announced by the Company.
Based on operating and capital investment costs established by the Company for the CO2 EOR operations at Inniss-Trinity, the utilisation of unused tax losses, and an average WTI spot price of US$100, the Company is attributing an undiscounted value to these potential resources of US$30/barrel after deduction of all taxes, royalties and operating costs, inclusive of CO2 supply. The Company therefore determines that the potential claim for estimated consequential losses against Challenger, based on 50% of net profits under the WPA, could be up to US$12,800,000 but may be revised upwards depending on forward oil price projections.
Phase 4 of the approved Inniss-Trinity CO2 EOR Project Proposal PRD25092019 allows for the application of the CO2 EOR Pilot learnings to be applied within new areas of the Inniss-Trinity field for upscaling CO2 EOR.
The SLR Consulting Ireland Ltd independent Competent Persons Report for the Inniss-Trinity field published 19 February 2020 gives Best Estimate recoverable CO2 EOR resources for the entire Inniss-Trinity field of 6.8 million barrels.
Based on 50% of net profits under the WPA this would amount potentially to estimated undiscounted consequential losses of up to US$102 million but may be revised upwards depending on forward oil price projections.
Paul Griffiths, Executive Chairman of Predator Oil & Gas Holdings Plc commented :
“We are disappointed not to have resolved our dispute amicably with Challenger. We believe that 10 months should have been sufficient time to reach a mutually attractive settlement. In view of the scale of the opportunity lost to the Company at Inniss-Trinity shareholders will understand why we were left with no alternative but to begin a process of litigation. Even more significantly it is important to stifle misinformation that could potentially delay the accelerated roll-out of new CO2 EOR projects in Trinidad.
To this end we are delighted with the outcome of our first physical trip to Trinidad since the outbreak of the Covid pandemic. Secondary to moving the resolution of the dispute with Challenger forward, the Company was involved in discussions with our trusted stakeholders to roll out up to six new CO2 EOR projects onshore Trinidad including the potential for a miscible CO2 flood.
Important very preliminary discussions were held regarding expanding our operations to include green hydrogen, developing markets for our potential gas products in general and sourcing non-fracked LNG for the Mag Mell project in Ireland. These are exciting developments only made possible by a physical visit with our stakeholders and the “Proof of Concept” established at Inniss-Trinity for CO2 EOR operations. Our next step is to explore further the potential to develop a carbon credits trading platform.
From the above it will be obvious that the Company will not allow a former junior partner to detract from the Company’s primary objective of building an integrated energy business in Trinidad aligned with the Energy Transition. Frankly we have been far too patient until now and that is a lesson that management has accepted responsibility for.”
This announcement contains inside information for the purposes of Article 7 of the Regulation (EU) No 596/2014 on market abuse
For more information please visit the Company’s website at www.predatoroilandgas.com :
Predator Oil & Gas Holdings Plc
Paul Griffiths Executive Chairman
Lonny Baumgardner Managing Director
Tel: +44 (0) 1534 834 600
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