TIDMZEN
RNS Number : 9077E
Zenith Energy Ltd
11 November 2020
November 11, 2020
The information contained within this announcement is deemed by
the Company to constitute inside information as stipulated under
the Market Abuse Regulation (EU) No. 596/2014 ("MAR"). Upon
publication of this announcement via a regulatory information
service ("RIS"), the inside information contained in this document
is now considered to be in the public domain.
ZENITH ENERGY LTD.
("Zenith" or the "Company")
Update on legal claim against SMP
Zenith Energy Ltd. ("Zenith" or the "Company") (LSE: ZEN; OSE:
ZENA-ME), the listed international oil & gas production company
focused on pursuing African development opportunities, is pleased
to provide an update on the legal claim (the "Claim") initiated
during 2019 by its subsidiary in the Republic of the Congo, Anglo
African Oil & Gas Congo S.A.U ("AAOG Congo"), against Société
de Maintenance Pétrolière ("SMP"), the rig contractor employed for
drilling services in wells TLP-103 and TLP-103C of the Tilapia
oilfield, following a series of significant performance failures by
the SMP 102 rig (the "Rig") during drilling activities.
Background
On July 15, 2019, AIM quoted Anglo African Oil & Gas plc
("AAOG"), the previous owner of AAOG Congo prior to its acquisition
by Zenith, made an announcement confirming that AAOG Congo had made
the Claim following poor performance by SMP in the drilling of
wells TLP-103 and TLP-103C, and the refusal of SMP to engage in
negotiations to cover the significant cost overruns that had been
incurred by AAOG Congo as a result of this.
The Claim was launched in the Paris commercial court against SMP
to recover costs of US$3.1 million relating to SMP's unsatisfactory
performance.
In taking the decision to launch the Claim for costs against SMP
the following reasons were considered significant at the time:
-- AAOG Congo had maintained extensive, contemporaneous
technical records of the failures of the Rig and the losses and
delays that were caused as a result;
-- SMP had not put forward evidence, of any kind, to suggest
that Rig performance was not the cause for cost overruns; and
-- Advice from International counsel in London, Paris and the
Congo was that the Claim had merit.
To strengthen its position, in addition to the commencement of
the Claim, AAOG Congo also withheld payment of SMP's final invoice
for an amount of approximately US$650,000, and exercised a
retention right over the Rig which, at the time, was positioned
within the Tilapia oilfield.
SMP subsequently retaliated by obtaining a number of unjustified
seizure orders over the fixed assets of AAOG Congo in the Republic
of the Congo, as well as over its local bank accounts.
As detailed in AAOG's above-mentioned announcement dated July
15, 2019, the seizure orders were unenforceable because AAOG
Congo's fixed assets were owned in partnership with SNPC, the
National Oil Company, and consequently could not be seized.
Further, the granting of these orders had no bearing on the
merits of the Claim launched in the Paris courts by AAOG Congo
against SMP.
Under the rules and conventions of the Paris commercial court,
mediation between the parties engaged in a dispute is a recommended
course of action. As a result, a supervised mediation meeting took
place during the Autumn of 2019.
On December 11, 2029, AAOG announced that mediation efforts had
proven unsuccessful and that, as a result, AAOG Congo would
continue to vigorously pursue its Claim in the Paris courts.
Update
The Company can confirm that it has recently been successful in
obtaining a revocation of the court order that had wrongfully
blocked its bank accounts. An amount of approximately US$36,000 has
now been unfrozen and made available to provide additional funding
for AAOG Congo.
Zenith believes the Claim launched by AAOG Congo has merit,
especially on account of the significant evidence collected at the
time to substantiate its position.
Following interactions with its French legal advisers, the
Company has decided to continue vigorously pursuing the Claim to
recover costs of approximately US$3.1 million. The possibility of
increasing the Claim amount is also being explored in consideration
of the commercial damages suffered by AAOG Congo as direct result
of SMP's drilling performance.
The Company has not provided for the potential recovery of such
costs in its cashflow projections. Therefore, any success in this
matter would enhance the Company's cash position.
Andrea Cattaneo, Chief Executive Officer, commented:
"We are pleased to have successfully obtained the revocation of
the court order that had resulted in AAOG's bank accounts being
frozen. The recovery of approximately US$36,000 has a symbolic
significance because it shows that we are steadily achieving the
gradual recovery of moneys rightfully held by, as well as owed to,
AAOG Congo.
The Company has consulted with its French legal advisers and,
having evaluated the merits of the case and the significant
potential compensation payment of at least US$3.1 million, intends
to zealously pursue AAOG Congo's Claim. To this end, we plan to
reach out to third party financing providers, specialised in legal
cases such as these, in order to avoid any cash burden being
incurred by the Company in pursuing the Claim going forward.
I look forward to updating the market regarding further progress
in the Republic of the Congo in the period ahead."
Further Information:
Zenith Energy Ltd
Andrea Cattaneo, Chief Executive Officer Tel: +1 (587) 315 9031
-----------------------------
E-mail: info@zenithenergy.ca
-----------------------------
Allenby Capital Limited - Financial
Adviser & Broker
-----------------------------
Nick Harriss Tel: + 44 (0) 203 328
Nick Athanas 5656
-----------------------------
Notes to Editors:
Zenith Energy Ltd. is an international oil and gas production
company, listed on the London Stock Exchange (LSE:ZEN) and the
Merkur Market of the Oslo Stock Exchange (ZENA:ME).
Zenith's development strategy is to identify and rapidly seize
value-accretive hydrocarbon production opportunities in the onshore
oil & gas sector, specifically in Africa. The Company's board
of directors and senior management team have the experience and
technical expertise to develop the Company successfully.
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