Peak Petroleum Industries Nigeria Limited is the 100% owner of the OML 122 license in Nigeria. Under the terms of the FSA which governs the development of the Bilabri field, Peak is obliged to pay 60% of costs after Equator funds 100% of the first two wells in the development program. On 28 September 2006 Equator delivered a cash call to Peak. The cash call was due for remittance to the Joint Account within 10 days from the date of the cash call. Having not received payment of the cash call by the due date Equator formally issued a default notice on October 13, 2006. The terms of the FSA allow for 90 business days to remedy any default.
According to the terms of the FSA a default by Peak, as the field owner, results in its rights and obligations in the Field in respect of which it is in default shall be converted to a carried interest and its allocation of Profit Hydrocarbons shall be reduced to 20%. The unpaid cash calls amount to approximately US$ 31 million as at the end of January 2007. This amount has been funded by Equator to the Joint Account.
Equator entered into negotiations with Peak with regard to the default. The purpose of the negotiations was to ensure that Peak had adequate time to remedy the default. To that end Equator has granted an extension of the default remedy period. This extension will expire on April 27, 2007. Should Peak be able to organize funding to remedy the default within the extension period Peak will be able to remedy its default with a payment of 120% of the outstanding amounts owing to Equator.
Should Peak not be able to organize finance to remedy its default in the extended remedy period then Equator will assume 80% of the available profit hydrocarbons from the Bilabri field as opposed to its existing 40% entitlement of profit hydrocarbons from the field.
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