The decision follows a year of successive delays and missed deadlines despite repeated assurances to the contrary by the contractor and thus their failure to perform the operations contemplated by the contract. After serving the contractor with several Notices of Default, and in light of its continued inability to provide the necessary rig certifications, Candax is of the opinion that the drilling equipment is not in compliance with essential health, safety and environmental standards. As a result, formal notice to terminate the contract has been served upon the contractor. Candax has not incurred any expenditures with or made any payments to the contractor relating to the re-development drilling contract.
Candax is focused on obtaining an alternate drilling option. The water depth at El Bibane (6 to 8 meters) has always severely limited the number of jack-up rigs capable of undertaking the program. Candax is now negotiating with a number of contractors, but the market for suitable jack-up drill rigs remains tight, although significantly better than a year ago and the nearest term availability is unlikely to be before mid-year.
Total investment to date on the re-development project has been approximately US$14 million (on a net basis), which includes the project engineering for the onshore and offshore facilities upgrades and pipeline and platform installation contracts which are 50% completed and on budget. All outstanding work on these related contracts will be phased in and completed in time for immediate hook up to the wells at El Bibane as they are drilled and completed. Candax maintains a strong balance sheet with a current cash position of approximately C$50 million.
Michael Wood, President & CEO commented:
"The El Bibane re-development program remains Candax's number one priority and we will be moving this project ahead as soon as appropriate offshore equipment can be sourced and brought on-site. Our treasury position remains strong and funding for the program remains in place. While this continued delay is disappointing, technical, safety and environmental considerations must take priority."
In separate news, Candax announced that John Willis has been appointed Chief Operating Officer effective February 1, 2007. Willis is an experienced energy executive, and brings a strong operational track record to the team. He is a mechanical engineer with over 30 years of major project development and drilling experience with both international and independent oil and gas companies, including a number of senior positions with Conoco in the UK. Willis is currently a director of consulting firm TransMed International, and is Treasurer of the Libyan British Business Council.
Michael Wood, President & CEO also commented:
"I am pleased to welcome John Willis to Candax. As Chief Operating Officer, he brings considerable experience that will strengthen our management team and enhance our operational capabilities in the field. John's valuable contacts in the Middle East and North Africa will also benefit Candax going forward."
Candax Energy Inc. is an international energy company with its head office in Toronto, Ontario, Canada and management offices in London, Dubai and Tunis. The Company holds a number of concessions in Tunisia through its subsidiary companies and is involved in the exploration and production of oil, gas and power generation in the country. Candax was formed through the combination of a highly experienced executive management team with successful Canadian founders and financiers, to develop an international upstream oil and gas project portfolio. Candax is initially focusing its growth activities on production and development projects in the Middle East and North Africa, where the group has strong relationships as well as extensive management experience.
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