LONDON (Alliance News) - Oilex Ltd on Wednesday confirmed it intends to defend itself against claims made by one of its shareholders, Australian-listed Zeta Resources Ltd, but said it is still exploring options for a "commercial resolution" to resolve the dispute.
Oilex shares were down 2.4% to 0.610 pence per share on Wednesday morning, having jumped initially to 0.70p.
Back in July, Oilex launched a capital funding programme worth AUD30.0 million, which included a AUD9.4 million deferred settlement from Zeta Resources.
Currently, Zeta holds a 10.3% stake in Oilex, which would have risen to 19.6%.
That capital funding programme was conducted to allow Oilex to carry out a work programme in India, complete minimum work commitments in Western Australia, and for working capital purposes.
However, in November, Oilex said that Zeta had failed to settle the subscription for the deferred settlement portion of its placement and convertible note and that Zeta had launched legal action against Oilex.
Zeta was expected by Oilex to pay for over 124.0 million shares in the company at a price of AUD0.0418 per share before the end of November 13, the same date Oilex was informed Zeta was pursuing legal proceedings against the company.
In addition to those shares, Zeta agreed to subscribe for AUD4.2 million of 20-year, zero-coupon unsecured convertible loan notes, convertible into Oilex shares at Zeta's option at any time.
On November 12, Zeta claimed the funding agreement it signed with Oilex was "void", meaning it should not have to pay the amount claimed by Oilex, and in turn said Oilex should pay Zeta "damages and compensation", including interest and costs.
Oilex initially said the claims made by Zeta were "without merit".
Zeta said it claimed Oilex had either engaged in "misleading or deceptive conduct" or conduct that was likely to be misleading or deceptive, contravening Australian exchange rules.
Zeta said Oilex had failed to disclose that its Indian joint venture partner on the Cambay field, Gujurat State Petroleum Corp Ltd, had "for some time" been in default in paying cash calls due under the joint venture agreement, Zeta claimed.
On November 11, Oilex said it was in talks with its Indian partner about the cash calls the Indian company owed, which amounted to USD7.7 million at the end of October, increasing from USD1.6 million at the end of June.
The Cambay field is one of Oilex's primary assets, with Oilex describing it as "the most significant component of the company's portfolio".
At that time, Zeta said: "Had Zeta known of the true position at the time of its decisions to invest were made, it would have had a different view as to the prospects of Oilex, and it would not have made its investments in Oilex. Zeta was not informed of the true position relating to GSPC at any time before it entered into the funding agreements.
On Wednesday, Oilex said it has notified the Federal Court of Australia and Zeta Resources that it intends to defend itself against the legal proceedings filed by Zeta, and will claim that Zeta has failed to settle the subscription within a timeframe that was agreed between the two companies.
That defence and cross-claim will be filed by December 16.
However, Oilex said it is still exploring options for a "commercial resolution" to the dispute, but this looks set to draw out the court case.
Zeta and Oilex have both agreed that, apart from Oilex filing a defence and counter-claim, that neither company will take "further steps" in the legal proceedings until the start of March 2016.
Zeta last made an announcement to the Australian exchange on November 25, when it said it "remains fully committed" to the legal proceedings.
By Joshua Warner; joshuawarner@alliancenews.com; @JoshAlliance
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