BARAKA Energy & Resources’ participating interest in two permits located in the Northern Territory’s South Georgina basin will be diluted to an unspecified amount after the company settled a dispute with its operating partners Statoil and PetroFrontier Corporation.
Baraka announced at the end of June that the parties had agreed to settle the court action launched by the Perth-based company in March
The settlement will see Baraka withdraw its claim that the budget and 2014 work program for the two permits were invalid.
In return, Statoil and PetroFrontier will withdraw their claim that Baraka is in default under each joint operating agreement after it failed to pay cash calls under the 2014 work program.
Furthermore, Statoil and PetroFrontier will agree that Baraka has elected not to contribute to the 2014 work program and budget.
Due to Baraka’s decision not to financially commit itself to the 2014 work program on permits EP127 and EP128, its 25 per cent interest in each joint venture and permit will be diluted.
However, the final extent of dilution will not be known until after the work program expenditures are incurred and calculations carried out.
While Baraka has elected to opt out of this year’s working capital commitments for the permits, the agreement will enable Baraka to receive data and information relating to the joint operations for the work program and budget.
Baraka’s previous move to launch proceedings in the Supreme Court of Western Australia will now be dismissed on the basis that each party pays its own costs. It also remains subject to execution of a deed of settlement and release reflecting those terms, Baraka said.
While Baraka didn’t provide any additional comment in its statement on its future intentions in the South Georgina basin, the settlement will give the partners a clean slate moving forward.
Baraka’s decision to withdraw its claim that the 2014 work program was invalid to prevent a lengthy and costly legal battle for the Perth-based company is in line with the company’s initial stance to avoid “legal confrontations and expenses where possible.”
Baraka’s decision to dispute the validity of the work program boiled down to the hefty cost outlay it would have needed to cover its share of the $26.6 million campaign.
At the time, the company conceded it would be unable to meet the allocated $6.6 million needed for work on the permits in 2014 without diluting its shareholders’ existing capital.
Baraka was also unhappy with Statoil’s plans to focus on plugging and abandoning the wells for data purposes.
PetroFrontier, which holds a 15 per cent participating interest in the permits, and Statoil (60%), plan to drill up to five vertical test wells under the 2014 work program.
All wells will include an extensive open hole evaluation program and up to three of the wells will be cased for future hydraulic fracture stimulation and production testing.