Interoil Exploration Updates on ANH Contracts
Interoil Exploration Addresses ANH Contract Developments
Interoil Exploration and Production ASA (the "Company") has announced a significant agreement involving its Colombian subsidiary, Interoil Colombia Exploration and Production ("ICEP"). The agreement is with the Colombian National Hydrocarbons Agency (ANH) concerning a partial termination of the Exploration and Production contract related to the LLA-47 block.
Background of the LLA-47 Contract Termination
The decision to partially terminate the LLA-47 Contract stems from ongoing community opposition to exploration efforts. This resistance has hindered the normal development of operations and the fulfillment of exploratory commitments. The ANH had previously granted multiple time extensions and suspensions to address these challenges.
As per the terms of the partial termination, the exploration commitments associated with the contract will cease. Consequently, the exploration area will revert to the ANH. However, this shift will not impact the production activities at the Vikingo well, which have faced no objections from the local communities. Production will continue for the well's remaining economic lifespan.
Financial Implications of the Termination
Under the impending termination agreement, ICEP and the ANH are expected to finalize terms without imposing penalties or compensation obligations on ICEP or the Company due to unfulfilled exploratory commitments. This arrangement alleviates the need for ICEP to undertake exploratory investments in other areas as a condition stemming from these contracts.
The commitments that are being relinquished include plans to drill nine exploration wells, which represent a cumulative investment of USD 27,000,000. For the Vikingo well, expectations remain high that production will continue effectively without interruptions.
Impact on the Altair Block and Future Operations
In addition to the LLA-47 developments, ICEP anticipates a similar termination regarding the neighboring Altair block. This termination is also derived from the same community-related issues that influenced the LLA-47 contract.
Details of the Altair Contract Termination
The termination of the Altair Contract will be complete, unlike the partial termination of LLA-47. The Altair block is currently inactive, meaning ICEP will not retain any production areas. Importantly, no penalties or compensation will occur for the unfulfilled exploratory investment obligations, which primarily involved the drilling of a single exploration well with a projected investment of USD 3,000,000.
Adjustments to Financial Guarantees
As part of the contract termination negotiations, the ANH has authorized ICEP to significantly reduce the financial guarantees linked to the LLA-47 Contract. Previously set at USD 11,100,000, this guarantee is being lowered to USD 100,000. Similarly, the guarantee for the Altair Contract will also be adjusted down to USD 100,000 from the previous USD 300,000 requirement.
Internal Processes and Future Announcements
The ANH will review the termination of the LLA-47 Contract through an internal committee. This review includes the execution of a Minutes of Partial Termination. Key elements of this process will entail the transfer of the exploration area back to the ANH, communication to local communities regarding the termination, and issuance of acknowledgments related to previous exploration activities, as well as necessary certificates confirming labor and supplier payments.
Moreover, the Company will convene a written resolution to secure approval for the terminations from holders of the Senior Secured Callable Bonds 2015/2026 issued by Interoil Exploration and Production ASA. Further updates will be disclosed to bondholders following the proposal's distribution.
Company Overview and Market Position
Interoil Exploration and Production ASA is a Norwegian exploration and production company listed on the Oslo Stock Exchange. The Company holds the operator and license for various production and exploration assets across Latin America, including Colombia and Argentina, with its headquarters situated in Oslo.
This announcement is classified as inside information according to the European Market Abuse Regulation and is intended to keep stakeholders informed about recent developments pertaining to ICEP's operations and future prospects.
Frequently Asked Questions
What led to the termination of the LLA-47 Contract?
The termination was primarily driven by community resistance to exploration activities, which hindered operational development.
Will ICEP face penalties for the contract terminations?
No penalties or compensations will be imposed on ICEP due to the contract terminations.
How many wells were planned under the exploration commitments?
There were nine exploration wells planned under the LLA-47 Contract, which represented an investment of USD 27,000,000.
What is the status of the Vikingo well?
Production from the Vikingo well will continue for its remaining economic life, unaffected by the contract terminations.
When will further announcements regarding bondholder resolutions be made?
A separate announcement will be distributed once the proposal regarding the terminations is made available to bondholders.
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