Update re East Ghazalat Concession 
RNS Number : 9053M
Nostra Terra Oil & Gas Company PLC
25 January 2016
 
25 January 2015
 
Nostra Terra Oil and Gas Company plc
("Nostra Terra" or the "Company")
 
Update re East Ghazalat concession
 
Nostra Terra and Independent Resources plc ("IRG") (AIM:IRG) make the following
announcement in relation to the East Ghazalat concession in Egypt ("East Ghazalat").
 
In this announcement:
"JV" means the joint venture between IRG and NTOG.
"North" or "NPIC" means North Petroleum International Company, a subsidiary of China
ZhenHua Oil Co. North is the owner of the other 50% interest and operator in East
Ghazalat (China Zhenhua Oil Co. is the wholly owned oil and gas arm of China North
Industries Corporation ("NORINCO"), a Chinese state-owned company).
"JOA" means the joint operating agreement between North and the JV which governs
East Ghazalat.
 
North has served a notice of default pursuant to the terms of the JOA in respect of
unpaid cash calls for November and December 2015, which the JV estimates to be
approximately $750,000. These cash calls had previously been rejected by the JV on
the grounds that they were manifestly excessive, contained no justification for the
level of funds demanded and failed to reflect the issues already raised by the JV
under the JOA in relation to the 2015 budget. 

The JV had previously served notice on North pursuant to the relevant provisions of
the JOA that it intends to undertake detailed audits of the accounting and procurement
processes, actual accounts, records and inventory for East Ghazalat for the 2013 and
2014 financial years.

These audits are in pursuance of the JV's policy, as previously stated on 15 October
2015, of seeking to improve operating margins through cost reduction initiatives and
to implement further reserve enhancement opportunities in a disciplined and rigorous
manner.

The JV believes that the service of the notice is in part in response to the
submission of the audit request by the JV and the challenges it has been posing and
continues to pose to North in its capacity as operator.

On completion of the acquisition, the right to recover under the unresolved audit for
the 2012 year undertaken by TransGlobe was transferred to the JV. In the JV's view,
proper process has not been followed by North or its predecessor as operator in response
to the 2012 audit report served on them in early 2013. Accordingly, the JV believes that
the overcharges identified in that audit, some $575,000, have become payable by North
and it is seeking resolution of this matter urgently.

The JV believes and is advised that North are in substantial breach of the JOA inter
alia in terms of the preparation approval and revision of budgets, in the provision of
requested information to the JV (to which it is entitled under the JOA), in the provision
of inadequate information to substantiate their cash call and in failing to declare or
manage certain significant conflicts of interest to the detriment of the JV. In an
environment of low and unstable oil prices the JV has challenged the budgets and the
levels of expenditure being incurred but North have refused to respond despite their duty
as Operator to do so under the JOA.

Accordingly, the JV is preparing a full and detailed Dispute Notice as required by the
JOA and has served that on North. The JOA provides for arbitration in London under UK
law if the dispute cannot be resolved. 

The JV continues to be entitled to its share of the revenues from East Ghazalat, both
past and future.  The JV is continuing to progress arrangements for prompt invoicing and
payment of its share. 

The JV believes that a robust response and challenge to North both through the Dispute
Notice and the audit process will result in greater control of overheads, better planning
and management of operations in the field and the recovery of overcharges from the 2012
audit and the possibility of recovery of overcharges from the proposed audits.

Further announcements will be made in due course.
 
For further information, visit www.ntog.co.uk or contact:
 
Nostra Terra Oil and Gas Company plc
Matt Lofgran, CEO
mlofgran@ntog.co.uk
Telephone: +1 480 993 8933

Sanlam Securities UK Limited
(Nominated adviser and broker)
Lindsay Mair / James Thomas
Telephone: +44 20 7628 2200

Walbrook PR
Gary Middleton
Nick Rome
Telephone: +44 207 933 8797

This information is provided by RNS
The company news service from the London Stock Exchange
 
END

Nostra Terra Oil & Gas Company plc issued this content on 25 January 2016 and is solely responsible for the information contained herein. Distributed by Public, unedited and unaltered, on 25 January 2016 16:18:21 UTC

Original Document: http://www.ntog.co.uk/scripts/php/rns_viewer.php?id=12672047