Petrel, Makman to Re-Start Work in Iraqi Fields
- Petrel-Makman Joint Venture to re-start to complete the Subba and Luhais oilfield development services contract
- Petrel has received $2 million
- Petrel to receive a further $5 million in 2 tranches over 12 months
- Petrel maintains a profit share but has no further liability or exposure
- This solution clears the way for expansion in Iraq
Petrel Resources announced the settlement of all outstanding issues on the Subba and Luhais oilfield development in Southern Iraq. Petrel has handed over primary responsibility for the final phases of the work, in accordance with the original Joint Venture Agreement of December 2005, but maintains a role. Petrel no longer has any liability or exposure to any possible project losses but maintains a profit share. Mobilization for the project, which has been in suspension for 20 months, will begin shortly.
Under the terms of the agreement reached between Petrel, Makman, its local Iraqi partner, and SCOP, an arm of the Iraqi Ministry of Oil:
- Petrel will receive a total of $7 million, of which $2 million has been received, and two further bank guaranteed payments of $2.5 million each in 2 tranches over 12 months;
- The Petrel/Makman joint venture will complete the development, with Makman assuming primary responsibility for the final phases of the work, including bulks procurement and implementation;
- Petrel will receive a 10% profit interest based on audited accounts;
- A new Letter of Credit for the balance of the contract is being put in place by the Iraqi authorities;
- Mobilization begins as soon as possible.
- All necessary official approvals have been delivered.
Petrel will now focus on developing direct oil exploration activities in Iraq.
David Horgan, Managing Director, commented, "I am delighted to report that all parties have agreed an amicable way forward for the Subba and Luhais oilfield development services contract in Iraq. Development work will re-start immediately. Under the agreement Petrel will receive $7 million in cash and carry no project liabilities. In accordance with our Joint Venture Agreement, Petrel now passes primary responsibility for the final phases of work to our Iraqi partners. We have effectively swapped Petrel's 50% holding for a 10% profit interest. This removes all uncertainty from the contract.
Successful resolution of all outstanding issues against a challenging background shows the goodwill that exists and determination of the authorities and our Iraqi partners to overcome all obstacles and realize Iraq's great potential."