Australia's Tangiers Petroleum says it intends to exit the Tarfaya Block off Morocco after the Tao-1 well showed dry and exceeded budget. The Tarfaya block is the company's only holding in Africa.
The company is now faced with either assigning its 25% interest to operator Galp Energia with a US$3.4 million consideration or withdrawing when the permit expires in February 2015.
“The final cost of the Tao-1 well was in excess of the company’s internal budget,” Tangiers Petroleum said. “Unfortunately, several of the costs were not fully quantified until after the well had reached total depth, at which time it was not possible for Tangiers to issue additional equity.”
As part of the deal, Tangiers Petroleum said it must complete its exit within six months or its Moroccan subsidiary DVM International SARL will owe Galp $3.4 million; however, Galp has the option to extend this period to 12 months. The company also agreed to pay Galp $3.4 million in stock or cash in the event that either its market capitalization exceeds $50 million, or should it delist from the Australian stock exchange, within seven years of the agreement.
In February 2013, Tangiers Petroleum announced that the block could be company-making when 3D seismic confirmed a potential 750MMbo recoverable with a geological chance of 23%. However, Galp reported a disappointing spud in June that showed poor reservoir quality in Trident, the primary objective, and no hydrocarbon shows in another prospect, Assaka.
Galp Energia farmed into the prospect by acquiring a 50% operatorship stake on 2 December 2012, noting at the time that the block, which is comprised of Tarfaya Offshore exploration permits I through VIII, was in a proven petroleum system that contained multiple leads within Jurassic and Cretaceous sediments and potential within the Tertiary and Triassic formations.
Tangiers Petroleum said it completed its $18.56 million financial obligations with the well, which it funded through its cash position, leaving it with a balance of only $1.1 million. In the same statement, Tangiers said it was assessing new opportunities in various stages of maturity, although none have reached binding agreements.
Prior to today's announcement, Galp Energia retained 50% in Tarfaya. Tangiers Petroleum held 25%, and Moroccon state-owned ONHYM held the remaining 25%.