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LONDON (Alliance News) - Clontarf Energy PLC and Petrel Resources PLC Thursday said they have reached an agreement with the Ghanaian authorities during legal proceedings related to their Tano 2A exploration licence in the country.
The two oil and gas exploration and development companies said they have secured a deal which means that they will be provided new land next to their current acreage to replace lost land when a rival rights application by CAMAC Energy Inc overlapped their own licence.
The company said that all parties involved in the deal seek to expedite the ratification process which requires Cabinet and Parliamentary approval in Ghana, and both Petrel and Clontarf have now ended High Court proceedings.
In April, Petrel Resources and Clontarf Energy PLC were granted an injunction in the High Court of Ghana protecting their rights to the exploration block in shallow water offshore Ghana.
They sought the injunction after discovering that a rival rights application by the US's CAMAC Energy had been ratified, which overlapped with a portion of the rights the two companies believe they have on the block.
Clontarf has a 60% interest in the block and Petrel a 30% interest.
Clontarf Managing Director David Horgan told Alliance News on Thursday that the changes to the Tano 2A block effectively remove all onshore elements of the licence and extend its offshore part of the asset further south towards Tullow Oil PLC's major Jubilee Field.
"Everything is offshore now, its good news for the company as the closer we get to the Jubilee Field discovery the better," Horgan said.
Two wells at the Jubilee field in 2007 found a large continuous accumulation of oil and gas and the field is now producing at roughly 100,000 barrels of oil per day.
However, Horgan also made it clear that due to high levels of red tape in Ghana, ratification of the changes could take some time and the partner's are holding back an aggressive development plan until that point.
"We've received indications that it could take four months to ratify," Horgan said. "Until then we wont be spending on site, but we expect to move into our development phase immediately after that and hope to spud our first well within three years of that point."
Clontarf announced separately on Thursday that it will convert its debt from South American lenders into equity by issuing 79.8 million new Clontarf shares at a price of 0.75 pence per share.
Clontarf shares were down 14% to 0.900 pence putting it amongst the top five AIM All-Share fallers, while Petrel shares were up 12% to 9.25 pence, putting it amongst the top five AIM-All Share risers on Thursday.
"The fall in our share price today has nothing to do with our underlying value, in fact our fundamental value has increased on dealing with the Ghanaian situation," Horgan said. "Its more likely because share prices tend to fall towards the price of a discounted share issuance."
In May, Horgan, who also worked as Managing Director at Petrel, stepped aside from his role at Petrel Resources to focus on bringing the company's Ghanaian dispute to a successful conclusion. He stayed on as a director, while the Chairman of both companies, John Teeling, took over management operations.
Thursday's news comes after Petrel warned in June that its pretax loss widened slightly in 2013 and its assets in Ireland, Ghana and Iraq all face difficulties.
The company said at the time that little work can be done on its Block 6 oil exploration licence in Iraq currently as it sits in the Anbar province in the west where war has been raging for months. It added that changes to the fiscal regime in Ireland, including royalties and higher taxes could hit its operations in the Atlantic Ocean's Porcupine Basin.
It also warned at the time about the situation in Ghana, noting that impressive development of the oil industry in the country has led to mistakes in the licensing system but it hoped to find a solution to the problem in the near future.
While in Iraq and Ireland Petrel's operations are facing significant risks, Thursday's answer to the Ghanaian licence dispute could be key to the company's operations moving forward.
By Tom McIvor; tommcivor@alliancenews.com; @TomMcIvor1
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