Kenya’s Block L6 JV partners FAR, PanContinental Oil & Gas Clash Over Cash Calls

Kenya’s Block L6 operator Australia’s Far has said it issued a default notice to it’s partner in the L6 Joint Venture (Pancontinental Oil and Gas) for continued failure to pay two cash calls from 12 Feb 2015 although the latter has disputed the notices in a new statement.

“Under the terms of the Joint Operating Agreement, FAR has issued a default notice to it’s partner in the L6 Joint Venture (Pancontinental Oil and Gas) for continued failure to pay two cash calls from 12 Feb 2015,” Far told investors in its latest quarterly activities report.

Responding to a statement FAR issued to its shareholders PanContinental Oil and Gas alleges the joint venture had only planned work to be undertaken on block L6 onshore of which civil upheaval and security incidents prevented any appropriate access for petroleum operations to be conducted.

PanContinental Oil and Gas adds that there is still no access to that portion and therefore no work is capable of being carried out on that portion of block L6 and hence there remains no need for the cash call.

PanContinental is also outranged by the default notice claiming that the operator had told the joint venture the majority of the $377, 801 funds to be raised were to be used by FAR’s subsidiary Flow Energy Pty Ltd staff and consultants.

The partner also has an issue with the calculations in which PanContinental claims should the cash calls have been valid share of the 2015 Cash Calls should be US$60,448 based on a 16% share of the “onshore” portion of block L6; not US$113,060 (based on a claimed 40% interest) as claimed by Flow.

“The 2015 Cash Calls issued to Pancontinental were on the basis that Pancontinental’s paying interest was 40%; not 16% without an explanation concerning the status of Milio. No work has been authorised by the joint venture to be carried out on the so called “offshore” portion of block L6 in which Pancontinental does have a 40% paying interest,” Pancontinental Oil and Gas CEO and Executive Director  Barry Rushworth  said in a statement.

The company also claims to have already honored paid US$38,060 (representing a share of fees payable to the Kenyan Ministry which Pancontinental was prepared to pay), thus leaving an amount purportedly owing of US$22,388 (which Pancontinental also disputes).

By letters dated 9 September 2015 Pancontinental wrote to Flow disputing the 2015 Cash Calls as well as the validity of the default notice and calling on Flow to provide it with relevant information.

According to PanContinental FAR is yet to provide a written response to those letters.

Meanwhile the operator says it continued discussions with the Government of Kenya to secure a one year extension to the current Petroleum Sharing Contract to allow exploration activity that has been hindered by recent tensions on ground, to commence. FAR is planning for a 2D seismic survey to commence as soon as possible.

In Block L6 FAR has 24% paying interest, PanContinental 16% and Milio International 60%. Offshore FAR has 60% interest while PanContinental has 40%. FAR has said it will reduce its offshore interest to under 25%. FAR has operatorship in both block L6 onshore and offshore.