Australia’s Tap Oil Ltd. recently provided an update on its commercial relations with the Thai entrepreneur, Chatchai Yenbamroong, and his Northern Gulf Petroleum Holdings Ltd. (NGPH).
As disclosed in Tap’s announcement on 14 April 2015, Tap received a statutory demand from NGPH demanding payment of $14.6 million in satisfaction of the 31 December 2014 2P reserves deferred payment, which NGPH alleged was due and payable.
As previously disclosed, the 2P reserves deferred payment is a staged acquisition payment that was agreed with NGPH and its subsidiary, Northern Gulf Petroleum Pte. Ltd (NGP) when Tap acquired its 30% interest in the G1/48 concession in the northern Gulf of Thailand in October 2010. The first of these staged acquisition payments is based on the joint venture 2P reserves estimate for the Manora oil field as of 31 December 2014.
The concession is operated by Mubadala Petroleum. The G1/48 concession contains Tap’s flagship project – the Manora Oil Development. The concession represents an opportunity for Tap to participate in the appraisal and development of a newly discovered oilfield and the exploration of a highly prospective Tertiary basin in a prolific hydrocarbon province.
Tap has now received the final joint venture 2P reserves report which estimates the gross Manora 2P reserves as at 31 December 2014 at 15.5 MM bbl. The reserves payment is based on the economic ultimate recovery, which is reserves at a certain date plus production to that date. Production to 31 December 2014 was 0.481 MM bbl. Thus, the reserves payment is based on 15.97 MM bbl. Based on this value, the amount owing to NGPH by way of the 2P reserves deferred payment is only $1.31 million.
Tap filed an application to set aside NGPH’s statutory demand in the Supreme Court of Western Australia and is seeking payment of Tap’s legal costs by NGPH. The application is scheduled to be heard on 26 August 2015.
Operator Mubadala Petroleum has now advised that a report compiled by Netherland, Sewell & Associates (NSAI) containing the 2P reserves estimate as of 31 December 2014 is complete. The NSAI report estimates the 31 December 2014 2P gross reserves at 15.5 MM bbl (net to Tap 4.648 MM bbl). The report was compiled by NSAI on the basis of the drilling results of the Manora wells to 31 December 2014, and does not include the results of the wells drilled during Q1 2015. The reserves payment is based on the economic ultimate recovery, which is reserves at a certain date plus production to that date. Production to 31 December 2014 was 0.481 MM bbl, thus the reserves payment is based on 15.97 MM bbl.
On the basis of this report, Tap calculates the 2P reserves payment owing to NGPH to be $1.31 million, and notes that NGPH has the option to request a further reserves certification by an independent expert (at its cost). Tap will provide a further update if it receives a notice from NGPH requiring the appointment of an independent expert. Otherwise, Tap has 30 days to satisfy this payment obligation to NGPH.
On 23 April 2015, Tap released its own estimate of Manora reserves and contingent resources as of 31 December 2014, incorporating all development well data up to 31 March 2015, of 19.3 MM bbl (100% for field).
Tap’s estimate assumes two additional development wells will be required in the following 18 to 24 month period. After considering the 31 December 2014 reserves report completed by NSAI, and the well data from the drilling in Q1 2015, Tap does not intend to make any changes to its 2P reserves. The Tap technical team and NSAI both agree that the estimation of reserves at the midpoint of a development drilling program and with less than 2 months of production data is problematic.
Tap notes that the borrowing base debt facility with BNP Paribas and Siam Commercial Bank is sized on the banks’ 1P reserves estimate. The NSAI 2P reserves estimate as at 31 December 2014 does not affect the borrowing base debt facility.
Tap has commissioned NSAI to do further work on the estimation of reserves as of 30 June 2015 for the purpose of satisfying a technical completion requirement for the bank’s completion process. Tap will inform the market of the result of this study when it is available.
Northern Gulf default on repayment of Tap Carry continues
NGP holds a 10% interest in the G1/48 Concession and the Manora Oil Development. As previously disclosed, 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 revenue is generated in relation to each oil lifting.
After repaying approximately $1.03 million from proceeds of oil liftings to early March 2015, NGP ceased making any further repayments to Tap. Tap has now issued default notices in respect of an amount totaling $3,553,736. The defaulted amount remain outstanding and is accruing interest.
Tap considers it has made all payments due to the Northern Gulf entities as and when they are due and payable.
$27 million Northern Gulf default on Manora costs remains unpaid
On 20 March 2015, 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 says NGP 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 $27.1 million. Tap also says that this defaulted amount remains outstanding and the operator continues to pursue the available remedies against NGP as prescribed by the joint operating agreement.
Tap vows to keep the market advised of all material developments in relation to these matters.
Image: Manora Oil Development / Tap Oil
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