Tap Oil Ltd. has provided an update on its commercial relations with Chatchai Yenbamroong and his Northern Gulf companies, including that Northern Gulf Petroleum Pte. Ltd. (NGP), a Singaporean company that is a subsidiary of Northern Gulf Petroleum Holdings Ltd. (NGPH) and controlled by Yenbamroong, is in default under the terms of a joint operating agreement for the G1/48 concession and the Manora oil development.
Since January, Yenbamroong and his Bermudan company, Northern Gulf Petroleum Holdings Ltd., have increased their voting power in Tap from 6% to 19.98% of Tap’s total issued capital through various on-market trades.
Yenbamroong has advised Tap of his intention to call a general meeting of Tap shareholders to consider his proposal to replace all but one of Tap’s existing directors with his own nominees.
NGP holds a 10% interest in the G1/48 concession and the Manora oil development. Under the terms relating to Tap’s acquisition of its 30% interest in the G1/48 concession and the Manora oil development from NGPH, NGP agreed to repay $10 million to Tap out of NGP’s share of production from that project. This is an ongoing repayment obligation as and when proceeds are received from each oil lifting.
After repaying $1.03 million from proceeds of oil liftings to date, NGP has recently ceased making any further repayments to Tap. On March 30, Tap gave notice to each of NGP and NGPH of the failure to repay $578,862 to Tap by way of this carry. The defaulted amounts remain outstanding and are accruing interest. Further amounts become payable each time oil lifting proceeds are received.
Tap considers it has made all payments due to the Northern Gulf entities as and when they are due and payable. However, Tap has now reserved all of its rights in relation to this default.
On March 20, Mubadala Petroleum, the operator of the G1/48 concession and the Manora oil development, gave notice to NGP that it is in default under the terms of the G1/48 joint operating agreement.
Tap understands that NGP has failed to pay when due its 10% participating interest share of project costs for the Manora oil development. The notice specifies a total sum in default of $27,079,863.37. Tap understands that this defaulted amount remains outstanding. Consequently, and in accordance with the default provisions of the G1/48 joint operating agreement, NGP is no longer entitled to attend and vote at Operating Committee meetings, and to access any data or information relating to petroleum operations.
Should the default continue to remain outstanding, the G1/48 joint operating agreement also provides the following remedies: after 30 days, proceeds from the sale of NGP’s share of Manora crude oil being directed to the non-defaulting parties who have contributed to the default amount to be applied against such contributions; and, after 60 days, compulsory transfer of NGP’s 10% interest to the non-defaulting parties who have contributed to the default amount.
Tap expects to make a payment this year to NGPH based on the operator’s 2P reserves estimates as at Dec. 31, 2014. The operator is currently finalizing its 2P reserve estimates as at Dec. 31, 2014, for review by the joint venture. Accordingly, Tap is unable to provide an estimate on the exact size of this year’s reserves deferred payment. However, if the 2P reserves estimate for Dec. 31, 2014, remains the same as the 2P reserves estimates as at FID (20.2 million barrels gross), Tap will be liable to make a further payment of $7.65 million. If the Dec. 31, 2014, 2P reserves estimate increases beyond 20.2 million barrels, this payment will increase by $1.50/additional barrel (capped at $29.85 million).
The payment will be due within 30 days following the finalization of the year-end 2P reserves estimates for Manora – either through the joint venture process, or through a further reserves certification by an independent expert if required by either Tap or NGPH.