In May 2013, the companies signed sale and purchase agreements to transfer 70% interests in the producing Didon oil field and the Zarat Permit to EnQuest.
Last July, the Didon transaction was completed with the remuneration ($23 million) retained in escrow awaiting a letter of non-objection from the Tunisian authorities. However, the letter has yet to be received.
As the back-stop date of Jan. 31 has now passed the Didon transaction has been reversed. The $23 million held in escrow has been returned to EnQuest and PA Resources is 100% owner of the Didon concession.
As a consequence, the transaction for the Zarat Permit also terminated on Jan. 31.
PAR says the oil price decline means that Didon is currently cash flow negative and the situation will worsen as the wells decline until a campaign of infill drilling can be undertaken. This will require a substantial investment in the field.
The company is examining other options for reducing the negative cash flow, including shutting the field in until oil prices recover.
Zarat is Tunisia’s largest undeveloped hydrocarbon discovery and its development is important to offset the decline of the country’s gas production, PAR points out.
Over the past year PAR has been working with state entity ETAP to develop a plan of development for Zarat that it says meets the country’s gas needs while dealing with the large quantities of carbon dioxide in the gas in an environmentally sustainable manner.
That plan is now largely complete and PAR will continue to progress matters, including reviewing alternative ways of funding the development.