Kuwait Energy has issued United Oil & Gas with a default notice for failing to pay outstanding cash calls on the Abu Sennan licence, in Egypt.
Kuwait Energy puts the sum at $3.82 million. According to the joint operating agreement (JOA) United has 30 days to pay off the default, starting from January 28. If the company cannot pay this, then it may be required to exit the licence.
United had been in talks to sell its 22% stake to United Energy Egypt, which the seller describes as a sister company to Kuwait Energy.
“We are very disappointed that we could not reach agreement with United Energy Egypt to sell the Abu Sennan concession,” said United CEO Brian Larkin. The company had “worked tirelessly from early December and over the holiday period” on the sale.
“We had agreed the commercial terms, however, based on external legal advice, we were unable to sign” the sales agreement in the way that United Energy Egypt wanted. “However, we believe the differences could have been easily resolved and this commercial issue avoided.”
The sales agreement would have had an effective date of November 1, 2023, for $2.05mn. The increased figure in the default notice is owing to cash calls during the interim.
United said it believed that either a sale or a default would see it leave the asset. The company explained that it had opted to exit Egypt because of the challenging macroeconomic conditions and the difficulties in repatriating funds.
Value extracted
United believes the companies have extracted the “main value” from Abu Sennan, it said. This has prompted its move to refocus on other areas.
The company received only 13% of proceeds from Abu Sennan in US dollars, with the rest in Egyptian pounds. Despite this, in November last year, the operator issued a request for a “material” US dollar payment.
United said it would continue to work with its legal advisors on the default notice and that it was exploring other options.
The company recently relinquished a North Sea licence, after a farm-out deal failed. It remains upbeat on possibilities in Jamaica, though. It announced this morning that it had received a two-year extension for its Walton Morant licence.
Larkin said the company held more than 2.4 billion barrels of unrisked oil potential and the “promising” Colibri prospect. It aims to bring in a partner to support its exploration plans.
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