28th Jan 2015 09:05
LONDON (Alliance News) - Gulfsands Petroleum PLC Wednesday said it is at risk of losing its concession in Morocco if its Arawak Energy loan facility is recalled, as it will not be able to fulfil its drilling requirements during 2015.
At the end of last Friday, the company reported a cash balance of USD23.5 million, which includes the company's controversial USD10 million draw down from the USD20 million loan facility provided by Arawak Energy International Ltd .
The loan facility is a hot topic for Gulfsands at the moment. Last Friday, the company said Dubai-based Arawak had terminated the agreement between the two companies, leading to Arawak threatening to recall its USD10 million loan to Gulfsands should plans to remove Gulfsands' chief executive and commercial director be approved by shareholders.
Friday, Gulfsands said Arawak advised it that it the decision to terminate the agreement resulted from talks held with the company and public statements made by shareholders and non-executive directors of Gulfsands in recent weeks.
The Arawak loan has been a key component in a war of words between Gulfsands and Waterford Finance and Investment Ltd, its majority shareholder, as Waterford seeks to remove the company's chief executive and commercial director.
Waterford is calling for Chief Executive Mahid Sajjad and Commercial Director Ken Judge to be removed from their positions. The company's shareholders will vote on the proposal at an extraordinary general meeting, due to be held on February 3 after it was delayed from its original date of January 13.
Arawak told the company that in the event of the removal of Sajjad and Judge, it will not hesitate to enforce its rights under the loan facility.
Should Arawak decide to terminate the facility and demand repayment, Gulfsands said it would be obligated to repay the full USD10 million, along with USD1 million in additional fees and expenses.
Importantly, the company Wednesday highlighted that it still has three wells it must drill on the Rharb concession before November 9, 2015.
"Failure to fulfil the company's work programme obligations including these drilling commitments could result in the potential loss of the group's interests in the Rharb permits. Funding of these work programme obligations is presently dependent upon the continued availability of the Arawak Energy loan facility or alternate financing being available to the group," said Gulfsands.
On Wednesday, Gulfsands said it will be sufficiently funded if it can retain the Arawak loan facility. However, it warned that should the loan be called in it will need to consider all options.
"These options will include consideration of the raising of equity although the availability and terms upon which equity might be raised has yet to be established," it said in a statement.
Gulfsands said it has completed testing on the Dardara Southeast 1 discovery well on the Rharb concession. The well has now been suspended as a future gas producing well, said the company.
Further well testing was completed on the DRC-1 well, which lasted for 8 hours and reached a flow rate of 9.4 million standard cubic feet of gas per day. After the testing, the rig was moved to the Douar Ouled Balkhair drilling location, where the DOB-1 well was drilled on Tuesday, said Gulfsands.
Gulfsands said its estimated current liabilities, less receivables, totals USD7.5 million and the company has committed to spending a minimum of USD2.5 million in capital expenditure during 2015.
Gulfsands shares were down 1.8% to 25.05 pence per share on Wednesday morning.
By Joshua Warner; [email protected]; @JoshAlliance
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