Pebercan: Efforts Ongoing to Resolve Dispute with Cupet
On November 10, 2006, as part of the disclosure pertaining to its financial results for the period ended September 30, 2006, Pebercan Inc. (the "Company") indicated that Cubapetroleo S.A. (Cupet) was almost 2 months late in its payments owed to Peberco Ltd., a subsidiary of the Company, pursuant to the procedure set out in the production-sharing and sales agreements. The Company, through its subsidiary, sells all its oil production to Cupet.
Pursuant to such agreements, as at December 31, 2006, there will be an amount totaling approximately US$69 million owing in relation to the development and operation of Block 7, 55% or US$37 million of which is to be paid to Peberco and the balance to its partner, Sherritt International (Cuba) Oil and Gas Limited. This amount varies monthly and is based on the amount of contractual payments outstanding, namely those remaining unpaid 90 days after their respective billing date. The Company has intensified the negotiations with the Cuban authorities to find solutions to this matter.
In addition, pursuant to the production-sharing agreement, the Company must confirm the amount it will undertake to invest, in 2007, to develop the oil assets. The Company's proportionate share of the expected cost of such investment totals approximately $65 million, which corresponds to its interest in Block 7's operations.
The Company is concurrently pursuing all the abovementioned negotiations with Cupet and hopes to reach an agreement on the amount required to be invested during 2007 as capital expenditure during the third week of January.
As for on-site operations, the three wells currently being drilled by the Company will be completed by mid-January 2007. The Company maintains a 20,000 barrels/day production on Block 7 and until further notice, also maintains its normal daily operations.
Pebercan Inc. is involved in the exploration, development and operation of oil reserves in the Republic of Cuba. Its mining domain includes five concessions covering 6,055 km2, including Block 7, the only concession operated to date. Pebercan sells all of its production to the Cuban government, but is not subject to any restrictions on the sale of its oil.
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