Petroleum Africa
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Tuesday, February 3, 2015
The deal entered into between PA Resources and EnQuest for the transfer of 70% interest in each of the Didon producing oil field and the Zarat Permit toEnQuest has been cancelled. The two firms entered into a Sales Purchase Agreement in May 2013 and in July 2014 the pair completed the Didon transaction with the remuneration retained in escrow awaiting a letter of non-objection from the Tunisian authorities. Despite repeated verbal assurances from the Tunisian authorities that such a letter was imminent, none has yet been issued.
The back-stop date of January 31 has now passed and the Didon transaction has been reversed. The $23 million held in escrow has been returned to EnQuest and PA Resources is 100% owner of the Didon concession. As a consequence, the transaction in respect of the Zarat Permit also terminated.
The collapse in world oil prices has meant that Didon is currently cash flow negative and this situation will worsen as wells decline until a campaign of infill drilling can be undertaken, which will require a substantial investment in the field. PA Resources is currently looking at alternatives for reducing the negative cash flow from Didon, including shutting the field in until oil prices recover. The results of the Didon option planning will be shared with the company’s creditors in the context of the current refinancing negotiations.
The Zarat discovery is the largest undeveloped hydrocarbon discovery in Tunisia and its development is important to offset the decline of indigenous gas production in the country. Over the last year, PA has worked closely with ETAP in developing a Plan of Development (PoD) for Zarat that meets the country’s gas needs while dealing with the large quantities of carbon dioxide in an environmentally sustainable manner. The PoD is now largely complete and PA will continue to progress the Zarat Field development including examining alternative ways of funding the development.
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