Pancontinental Oil & Gas will pay a cash call made in December by Tullow Oil regarding the management costs of a licence offshore Namibia.
The company has previously disputed the claim, and is still disputing it, however it said on Thursday, the structure of the Joint Operating Agreement requires payment of the cash call first in order to avoid a possible default situation, and then resolution of any disputes later.
To remind, Tullow in December 2016 sent a cash call of $552,897 to Pancontinental for administration and other “non-exploration” costs in respect of operations in licence PEL 37, Namibia for the years 2014 through to 2016.
Pancontinental has expressed belief Tullow doesn’t not have the right to make such a cash call under the terms of the free carry with Tullow and has reserved its rights regarding the matter.
However, for the reasons mentioned above, Pancontinental has offered a staged payment plan which Tullow has accepted.
“Payments are to be made without prejudice to the Company’s right to contest the cash call and the Company is considering its position on the matter,” Pancontinental said.
No prior consultation
To remind, in its statement in December, Pancontinental had said the cash claim was related to “regarding common exploration costs, exploration license management, Tullow’s local office costs, and non-project general exploration.”
At the time, Pancontinetnal said the claim by Tullow had been made based on an adjustment to the joint venture accounts resulting from an internal review of costs incurred since 2014. Thus, Tullow believes it gives the company the right to issue the cash call.
“This claimed adjustment was made without any prior consultation with Pancontinental,” the Pancontinental said in December, adding that “the items, if accurate, are covered by the free carry as defined in the Tullow Farmout Agreement dated September 6, 2013,” and the cash call is invalid.
Namibian license PEL 37 4 best estimate has the potential for combined prospective resources of more than 900 million barrels of oil recoverable. Tullow is the operator of the license, with a drilling campaign required to begin by March 27, 2017.
PEL 37 covers three adjacent blocks over some 17,000 sq km in the blocks in the central Walvis Basin offshore Namibia.
Offshore Energy Today Staff