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Shares of Mercom Oil Sands plc (LSE:MMO) plunged on the London Stock Exchange today after the company failed to close the deal to complete the acquisition of 50% interest in four oil sand leases in Canada after several months of negotiation with its joint venture partner, Nordic Petroleum AS.
Mercom’s share price dived 36.8% to 1.5 pence by 1:40 PM GMT, following the statement from Nordic that the UK-incorporated firm, recently listed on the Alternative Investment Market, is in breach of contract after failing to agree with the proposed terms of the JV.
Prior to Mercom’s admission on AIM, the Canada-focussed firm entered into a farm-in agreement with Nordic on 25th February 2012 to obtain a 50% interest in the Chard Oil Sands in Alberta, Canada for CDN$700,000 and a CDN$2.5 million funding for exploration and development of the said leases.
In August, however, Mercom asked to review the farm-in agreement in light of volatile oil prices and “other investment opportunities” made available to the company, and has been in negotiation with Nordic for a revision of the JV agreement.
Both firms rejected each other’s proposals rewriting the earlier agreed terms and are now in discussions with their legal teams to remedy the failed negotiations.
“Nordic Petroleum AS and its subsidiaries will take the required legal steps to protect their position,” the Norway-incorporated oil and gas producer said in a statement.
Mercom is also taking legal advice in light of the recent development, according to the company.
The Chard Oil sands are located within the Athabasca oil sands north east of Alberta, which is home to the largest oil sand reserves in the world.
