Proactive Investors UK
By Jamie Ashcroft
DOB-1 spudded yesterday and it is expected that the drill programme will last 28 days
Gulfsands Petroleum(LON:GPX) has emphasised the current reliance of its operations upon its financing arrangements with Arawak Energy.
Arawak has previously threatened to cancel a co-operation and financing partnership with Gulfsands, should shareholders vote to remove chief executive Mahdi Sajjad and commercial director Ken Judge at next week’s extraordinary general meeting.
In November, major shareholder Waterford Finance (which now owns 28% of GPX) called for Sajjad and Judge to be removed. A shareholder vote will take on February 3.
Thus far US$10mln has been drawn from the US$20mln Arawak loan, and there would be a further US$1mln fee if the partner exercised its right to terminate the loan early.
Gulfsands said it currently has a cash balance of US$23.5mln, and it has US$12mln of free cash though this is inclusive of the US$10mln drawn from Arawak. The company estimates its minimum capital expenditure commitments as US$2.5mln and its current liabilities are US$7.5mln.
The Arawak loan would have to be repaid within 90 days.
Drilling and gas monetisation efforts in Morocco are currently dependent upon the Arawak facility, Gulfsands told investors today.
Failure to complete obligations of the work programme could potentially result in the company losing its stake in the project, it added.
Operationally, progress continues to be made.
Gulfsands highlighted the Dardara Southeast 1 discovery well (DRC-1) well has now been completed and suspended as a future production well, while the drilling of the Douar Ouled Balkhair (DOB-1) well is now underway.
DOB-1 spudded yesterday and it is expected that the drill programme will last 28 days.
Gulfsands intends to assess its subsequent exploration plans following the evaluation of DOB-1.
Commitments under the project include the drilling of three more exploration wells in the Rharb Sud area, by November 2015.
Currently, the company says its priority is to monetise gas production from the discoveries it has made in the Rharb Centre permit as soon as possible.
To this end, management expect production from the LTU-1 well to begin during the first quarter of this year.
Gulfsands also intends to continue exploration of oil targets in the Moulay Bouchta, Rharb Sud and Fes permits.
Work currently involves the reprocessing and upgrading of seismic data, and exploration drilling in these locations is penciled in for the fourth quarter.
