Oilex Shares Fall After Timor Leste Cancels Contract; Imposes Fine

By Alex MacDonald

LONDON--Shares in Oilex Ltd (OEX.AU) fell Thursday after the oil and gas explorer confirmed that the Timor Lest government has canceled its joint venture's production sharing contract and levied a fine as a result.

Oilex already warned Wednesday that Timor Leste's Autoridade Nacional do Petroleo, or ANP, was planning to terminate the contract on its own terms after having rejected the joint venture's request to mutually terminate the contract at no cost on Monday.

Oilex's joint venture partners--Japan Energy E&P JPDA Pty Ltd and Pan Pacific Petroleum N.L. (PPP.AU) with a 15% stake each; and GSPC (JPDA) Ltd, Videocon JPDA 06-103 Limited and Bharat Petroleum Corp. Ltd. (500547.BY) with a 20% stake each--initially submitted a request to exit the contract in 2013 after Timor Leste took the Australian government to arbitration over the cancellation of certain maritime arrangements in the Timor Sea that raised concerns about the contract.

ANP now wants the joint venture to pay a $17 million fine for failing to fulfil exploration activities in 2013 that were part of a previously agreed exploration budget. Oilex said the joint venture actually spent $56 million more than originally budgeted during the tenure of the contract but the ANP hasn't given the venture credit for the extra spending. As a result the penalty doesn't reflect the true spending on the project, the company said.

The joint venture has until June 12 to submit a response. Oilex, the 10% owner in the joint venture and operator, said it will review the notice and submit a response in due course. Oilex's share of the current penalty is $1.7 million.

Oilex's shares were down 7.4% at 3.13 pence a share, resulting in a market capitalization of GBP21 million or $33 million.

Write to Alex MacDonald at [e-mail]

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