Baraka Disputes Validity of 2014 Work Programs for 2 Permits in Australia
Baraka Energy & Resources Ltd. reported Monday that it has given notices to Statoil Australia Theta B.V. (Operator) and Petrofrontier (PFC) disputing the validity of the 2014 work programs on each of the Permits EP127 and EP128 in the Southern Georgina play in Australia's Northern Territory that will require to be resolved by arbitration under the relevant Joint Operating Agreement (JOA) for each permit. Baraka holds a 25 percent participating interest in each JOA, with Statoil holding 60 percent and PFC 15 percent. Statoil has farmed into PFC’s interests on condition that it fund PFC’s share of exploration costs.
The Operating Committee (OCM) under each JOA approved the 2014 work programs by a majority vote, with Baraka abstaining. If, contrary to Baraka’s notice disputing their validity, the work programs are valid work programs under each JOA, Baraka has given notice to the Operator and PFC that it will not contribute to their cost and that Baraka elects to dilute its 25 percent participating interest in each JOA.
The extent of any dilution will be nil if, as Baraka maintains, the relevant 2014 work programs are not valid. However, it would remain to be resolved what revised 2014 work programs might then be proposed by the Operator.
If the 2014 work programs are valid, then Baraka’s participating interest at the end of the programs will be determined by a formula that is the same in each JOA.
Baraka is seeking expert accounting advice on the likely outcome of application of the dilution formula if the work programs are held to be valid. This is expected to take approximately 4-6 weeks and Baraka will release this information as soon as it is available and considered by the board.
Baraka has taken these steps so as not to risk any breach of the JOA’s. If the work programs are valid, Baraka will remain a party to the JOAs with a reduced share.
The disputed 2014 work programs proposed by the Operators are outlined below with Baraka’s comments for the information of the shareholders.
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