Ann: FIRST OIL AT AJE FIELD NIGERIA-JKA.AX, page-33

.003 a real possibility tomorrow.....


MX OIL MAY KEEP AJE FIELD AS LICENSES IN MEXICO FAIL TO IMPRESS

[ 11 May 2016 09:09 ]
LONDON (Alliance News) - MX Oil PLC shares plummeted on Wednesday after the company said none of the assets in Mexico that were set to form the basis of the entire company are worth progressing, prompting it to consider cancelling a deal to sell its interest in a Nigerian asset.

MX Oil shares were down 39% to 0.500 pence per share on Wednesday morning.

MX Oil previously agreed to sell an option to GEC Petroleum allowing the firm to purchase its indirect interest in the Aje field offshore Nigeria, and had said the option was likely to be exercised once production from the field had started.

That production began to flow earlier this month, creating expectations that MX Oil was set to complete the sale of the Aje field imminently, as the company moves its attention to a string of assets in Mexico.

However, MX Oil Wednesday said oil prices have been "steadily increasing" and said it is expecting those prices to continue rising in the medium-term, making its indirect interest in the field "more valuable and further de-risked".

The fact GEC Petroleum has failed to make the first payment in order to secure the option allows MX Oil to keep its interest if it so chooses, but GEC Petroleum "remains committed" to purchasing the interest in the Aje field and is "working hard" to secure the required funding, MX Oil said.

"The board still believes that selling the investment to GEC Petroleum could still be an attractive option, particularly against the background of the company's current market capitalisation. However, at the same time, given the board's view on future oil prices and the upside potential of the second phase of the Aje development, another viable option would be for the company to retain this investment," said the company.

The Aje field is producing oil which is being stored on the floating production, storage and offloading vessel, which has been commissioned and has the capacity to store up to 750,000 barrels of oil and the ability to accommodate production rates up to 40,000 barrels per day.

The original reason for selling its indirect interest in the Aje field was to allow MX Oil to move its attention to Mexico after it secured a string of assets when the country opened up its market to foreign companies following over 75 years of a state monopoly.

However, MX Oil's update on its Mexican activities and assets published Wednesday will not please shareholders.

MX Oil was planning to sell its working interest in three of the four areas it secured through auctions in December to its partner in the country, Geo Estratos, for USD1.8 million. The plan was to focus all of its attention on one area, Tecolutla.

However, that deal has been terminated as Geo Estratos failed to place the necessary funds into a depository account on time.

The news got worse, as MX Oil also said the Tecolutla licence that was set to become the company's primary asset in the country is unlikely to deliver the value it was previously expecting.

"It would now appear that this licence is now unlikely to generate the required return to justify the necessary financial commitment and expected equity dilution resulting from the raising of funds required to develop this licence," said MX Oil.

The company has therefore decided that it would not be in the company's or shareholders' best interests to proceed with any of these licences particularly given the inherent risks associated with their funding in general and uncertainty surrounding its partner's funding ability," the company added.

By Joshua Warner; [email protected]; @JoshAlliance

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