(Alliance News) - Anglo African Oil & Gas PLC said Monday it has been informed it has claim against rig operator Societe de Maintenance Petroliere, which could "enhance its cash position".
Shares in the oil & gas developer closed down 9.8% in London at 3.90 pence each.
SMP is the company's rig contractor for wells TLP-103 and TLP-103C. AAOG is attempting to recover some of the cost overruns at these wells "following the poor performance" of SMP.
"The company is informed by international counsel that its claim has merit and any success in this regard would enhance the company's cash position," AAOG said. "The claim is a purely commercial matter that has no impact on the company's operations. It is within the company's control to bring the dispute to an end, however the directors believe it is in the best interests of the company to continue pursuing the claim."
According to AAOG, SMP refused to enter into negotiations to discuss the cost overruns.
As a result, AAOG has launched legal proceedings in an attempt to recover USD3.1 million of costs from SMP "underperformance".
AAOG said SMP has not launched any claim or counterclaim against the company.
In deciding to start legal proceedings, AAOG said it took into account it had maintained "extensive, contemporaneous technical records" of the "failures of the rig and the losses and delays that were caused".
AAOG noted SMP did not put forward any evidence to "suggest that rig performance was not an issue".
To protect is position, AAOG has withheld its final invoice, of about USD650,000, owed to SMP. AAOG has also exercised a retention right over the rig, which remains at AAOG's Tilapia site.
"SMP has now retaliated by seeking a seizure order over the fixed assets located at the company's Tilapia site and one of the company's Congolese bank accounts. The grant of this order was announced by SMP late last week and its effect is to grant SMP security over no more than USD650,000 worth of the company's fixed assets at Tilapia," explained AAOG.
AAOG said the order has no impact over its operations. AAOG is seeking a revocation of the order.
AAOG added: "The company has the financial means to pay SMP's final invoice. Payment of the invoice would leave SMP with no further right to seizure of any of the company's assets. However, and in addition to the challenge to the seizure order, the company continues, on advice, to believe that it is in the best interests of the company or its shareholders to continue withholding payment as part security for the claim to recover costs of USD3.1 million."