LONDON - Gulfsands Petroleum PLC Thursday reversed course and said it is suspending exploration activities in Syria, only two days after announcing strong drilling results in the strife-ridden country.
Gulfsands, a U.K. minnow that has forcefully defended its Syrian business even as international pressure on Syria has grown, said the move to suspend exploration - while not technically required by EU sanctions - is "consistent with the intent of the sanctions." It also noted that the sanctions have caused increasing difficulty to operate in the country and gain access to essential supplies and technical services.
Gulfsands in December ceased production in Syria to meet EU sanctions, a move that curtailed a key revenue source. The move Thursday follows a decision in December by Royal Dutch Shell PLC to pull out of Syria following EU sanctions. Syrian opposition groups are lobbying the United Nations this week to enact a tough new resolution on Syria.
"It is disappointing to be obliged to cease exploration following a recent run of considerable success and with substantial exploration potential still untapped," Gulfsands said. Gulfsands said it would retain a full exploration capability in Syria and remains hopeful of continuing its work when the "present difficult situation is resolved."
The firm has budgeted around $500,000 a month to pay its near 100 strong Syrian workforce and maintain a local presence without exploration.
In the first half of 2011 the company spent $24.1 million in Syria and generated $73.1 million of revenue from the country. Gulfsands said it was evaluating other prospects to "build a viable non-Syrian leg to the business."
Brokerage Canaccord Genuity said the news of the Syrian exploration halt is "clearly worrying" and noted that a change to the situation is unlikely in the near-term, according to a note.
Canaccord also warned that although the company does have a healthy cash balance--over $120 million--and is focused on building a viable non-Syrian leg to its business, previous historic attempts at this haven't been successful.
Gulfsands halted Syrian production Dec. 11, but until this week continued to pursue exploration in Syria.
On Tuesday, Gulfsands said exploration on its Khurbet East 102 well could contain 19.2 million barrels of oil equivalent.
Separately, the firm Thursday noted that Chief Financial Officer Andrew Rose will step down from the board effective April 30 to pursue other interests.
Copyright (c) 2012 Dow Jones & Company, Inc.
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