Baron Oil PLC Termination of Farmin Agreement with UOGG (3596Q)
11 September 2017 - 7:00PM
UK Regulatory
TIDMBOIL
RNS Number : 3596Q
Baron Oil PLC
11 September 2017
THE INFORMATION CONTAINED WITHIN THIS ANNOUNCEMENT IS DEEMED BY
BARON OIL PLC TO CONSTITUTE INSIDE INFORMATION AS STIPULATED UNDER
THE MARKET ABUSE REGULATION (EU) NO. 596/2014 ("MAR"). ON THE
PUBLICATION OF THIS ANNOUNCEMENT VIA A REGULATORY INFORMATION
SERVICE ("RIS"), THIS INSIDE INFORMATION IS NOW CONSIDERED TO BE IN
THE PUBLIC DOMAIN.
BARON OIL PLC
("Baron Oil" or "the Company")
Termination of Farmin Agreement with Union Oil & Gas
Group
Baron Oil PLC (AIM:"BOIL") ("Baron" or "the Company") announces
that the Farmin Agreement ("FIA") with Union Oil & Gas Group
("UOGG") has been terminated and Baron has taken back its full 50%
working interest share in Peru Block Z-34.
After several months of discussion and negotiations, the board
came to the decision that it would serve no useful purpose to
pursue legal action to wind up UOGG in the British Virgin Islands,
since the corporate structure is such that there are no financial
assets held in the company. In addition, to enter into such action
would severely prejudice ongoing farm-out discussions with third
parties and also negatively impact the status of the Contract
Licence for Block Z-34. In view of the short time frame remaining
on the Contract, it was deemed essential that a new working
relationship be established quickly with UOGG that would enable
Baron to play a full part in both the ongoing operations and the
farm-out discussions. The failure of UOGG to meet its financial
obligations following the approval of the Public Deed in February
2017 meant that Completion did not take place under the terms of
the FIA and a Termination Agreement to the FIA has now been
negotiated and agreed between Baron and UOGG with effect from
September 8(th) 2017.
No funds have been received from UOGG since the Contract
Operating Agreement was terminated at the end of April 2017 and the
effect of the Termination Agreement is that UOGG has no liability
to pay the US$2 million that should have been paid on Completion.
The net cash effect of this on Baron, taking into account local
taxes and other costs that would have been payable but were
conditional on the receipt of this US$2 million, is a US$1.16
million net loss to Baron' projected cash reserves. Costs incurred
under the FIA from April to August 2017 will still be due from UOGG
but, as from September 8(th,) all costs on Z-34 will be shared
50:50 between Baron and Plectrum Petroleum Ltd Succursal del Peru
(a wholly-owned subsidiary of UOGG). Baron and UOGG will together
take the steps necessary to reverse the effect of the Public Deed
executed in February 2017.
Bill Colvin, Chairman of Baron commented:
"UOGG's failure to abide by the terms of the FIA was extremely
disappointing, placing Baron in a very difficult position, and the
Termination Agreement is definitely not the best financial outcome
for Baron. However your board has finally concluded, with local
legal advice, that to take any other route would be likely to
destroy all remaining value in Block Z-34 and we would still be
highly unlikely to recover any funds that would have been due to
the Company under the FIA. In addition, Baron faced the possibility
of a 32% tax charge in Peru whether or not UOGG paid the
US$2million.
At this critical stage in operations on the Block it is
essential that the partners work as closely together as possible on
the farm-out negotiations and try to preserve the value of the
Block."
For further information:
Baron Oil Plc Tel: +44 (0) 1892 838 948
Malcolm Butler (CEO)
Cantor Fitzgerald Europe (Nominated Adviser and Broker) Tel: +44 (0) 20 7894 7000
Sarah Wharry (Corporate Finance)
Alex Pollen (Corporate Broking)
SP Angel (Joint Broker) Tel: +44 (0)20 7470 0470
Richard Hail / Richard Redmayne
This information is provided by RNS
The company news service from the London Stock Exchange
END
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