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Cameroonian State royalty obligation
Following a protracted negotiation with the State of Cameroon, in August 2020 the Group has concluded a long-standing dispute regarding the Logbaba Concession agreement, and in so doing has crystalised a liability to pay back-dated royalties to the Cameroonian State in the amount of US$10.2 million (net amount due by GDC). GDC and its joint venture partner are seeking to ensure that the royalty amounts payable are netted against amounts due by the Cameroon State for their participating interest in the Logbaba Project and accordingly the Directors have included an assumption in their forecast that the amount of US$10.2 million will not be paid within the next twelve months as discussions continue in relation to the State's participating interest in the Logbaba Project. There is no guarantee that the State of Cameroon will accede and any requirement to pay the royalty in the short term would have a material impact on the Group's ability to continue as a going concern.
From the notes there could be a ruling at the end of January. The above was taken from the last set of half year results.
Yes, aware of it . No surprise there. Just another opportunity to screw vog into the ground.
RNS needs to be read in full - it was a GDC decision to crystallise the liability post period-end:
Also includes:
Royalty Obligations
The separation of the business into upstream and downstream business units is a requirement of the Petroleum and Gas Codes in Cameroon, and is an industry norm.
Operationally, the separation and a downstream framework makes sense for the Company as the Logbaba Field depletes over time and the Company seeks to source other gas for the pipeline network. In order to comply with the Gas and Petroleum Codes in Cameroon, the Logbaba partners are working with the Cameroonian Government to separate the business into its upstream and downstream components. The parties are in ongoing negotiations with SNH regarding the mechanism and fiscal arrangements for, amongst others: the potential participation of SNH in the downstream activities; the allocation of assets, liabilities, revenues and costs, and the associated transfer pricing mechanisms; and the net settlement required by SNH to take ownership of their entitlement. One of the matters under negotiation has been the parties' obligation to pay state royalties. In prior years this potential liability was disclosed as a contingent liability. Following a GDC decision post year-end, the royalty liability has now been crystalised and the Company has accordingly provided US$10.2 million at 30 June 2020; however, GDC has requested to "net out" against amounts that may be owed by SNH. The presentation of the consolidated Financial Statements has required management's judgement with regard to the outcome of these negotiations to ensure that the Financial Statements present a fair and reasonable view of the financial position and results of the Company.
and:
Accounting for joint operations
On 12 June 2017, Société Nationale des Hydrocarbures ("SNH") exercised its right in accordance with the Participation Agreement to participate for 5% of the upstream operations of the Logbaba Project. This participation is retrospective and therefore SNH are deemed to have participated since first production. The net share of this venture that has been included in these Interim Financial Statements is 57% of the upstream operations and 60% of the downstream operations.
The Interim Financial Statements are prepared on the basis that downstream operations charge cost plus 15% to the upstream operations as a fee for marketing the gas. This transfer pricing mechanism has not been formally agreed to by the Parties of the Logbaba Concession but represents management judgement of the most likely outcome of the current negotiations. Shared services have been allocated between upstream and downstream operations based on management's assessment of the activity during the period.
What point are you making sparrow?
Thanks RF
lol :)