REG - United Oil & Gas PLC - Notice of Default from the Operator of Abu Sennan

United Oil & GasAnnouncement

22/01/2024 07:30

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RNS Number : 4312A  United Oil & Gas PLC  22 January 2024

 

United Oil & Gas PLC / Index: AIM / Epic: UOG / Sector: Oil & Gas

 

22 January 2024

United Oil & Gas plc

("United" or "the Company")

 

Receipt of Notice of Default from the Operator of the Abu Sennan Concession

 

United Oil & Gas Plc (AIM: "UOG"), the full-cycle oil and gas company
with a portfolio of production, development, exploration and appraisal assets
announces that it has received a default notice ("Default Notice") from Kuwait
Energy Egypt Limited ("Kuwait Energy" or "Operator") for a total of USD
$3,822,143 for outstanding cash calls in relation to the Abu Sennan
concession. Pursuant to the joint operating agreement ("JOA") relating to the
Abu Sennan concession, the Company has 30 days ("Default Period") to remedy
the default from the start of the default period which is 28 January 2024.
In the event that the Company does not remedy the situation during the Default
Period, then each non-defaulting party to the JOA has the option to require
the Company to withdraw from the Abu Sennan Concession pursuant to the terms
of the JOA.

 

The Company had been in advanced discussions regarding the potential sale of
its 22% stake in the Abu Sennan concession to United Energy Egypt Limited
("UEEL"). UEEL, a sister company of the operator Kuwait Energy; both share the
same parent, United Energy Group which is listed on the Hong Kong stock
exchange.  However, discussions aborted as the Company was unable to agree to
execute the draft sale and purchase agreement ("SPA") presented to it by UEEL
following legal advice notwithstanding the attempts from the Company to agree
a mutually acceptable SPA.

 

The effective date for the SPA was 1 November 2023, when the consideration was
$2.052 million which would have settled all outstanding cash calls as at that
date, and the Operator would pay all future cash calls and receive all future
revenues. The increased figure for the default notice is due to the cash calls
received for work undertaken on the concession in the interim period.

 

The Company believes that its commercial position remains unchanged between a
default scenario out of the Abu Sennan concession and the commercial terms of
the SPA (if completed), as the proposed cash consideration from a sale would
be used to settle outstanding cash calls with the Operator and either of
scenarios would involve the divestment of the Abu Sennan concession.

 

The decision to divest from Abu Sennan was influenced by the challenging
macro-economic conditions in Egypt and the persistent difficulty the Company
faced in repatriating funds from the country, as previously reported. The
Company remained committed to collaborating with local Egyptian stakeholders,
EGPC, and the Operator to navigate and address these challenges but
unfortunately these efforts have not been rewarded. Also, the 2024 proposed
budget, indicating a net deficit of USD $3 million, reflects United's belief
that the main value has been extracted from the Abu Sennan concession,
prompting a refocus by the Company on other assets to enhance shareholder
value.

 

Before September 2023, the Company received payments from the Egyptian
National Oil Company ("EGPC") in both USD and EGP, with the latter primarily
used to settle operational liabilities. Since September 2023, approximately
13% of payments have been in USD, with the rest in EGP, resulting in
considerable foreign exchange losses when converting EGP to USD. The Company
has a receivables balance of USD $0.80 million outstanding from EGPC and cash
in the bank  of approximately USD $1.3 million.

 

In early November 2023, the JOA partners on the Abu Sennan concession received
a request from the Operator to make a material USD payment to support the
operational needs of the joint venture. Since this time, United has engaged
with EGPC to seek a USD remittance against our outstanding USD receivable
position to satisfy this demand from the Operator. In parallel, United has
engaged with the Operator to seek alternative solutions to this USD demand,
which included a continuation of the agreed position that had previously been
accepted by the Operator, whereby the JOA partners settle the Operator cash
calls in EGP.

 

United is currently reviewing the Default Notice in consultation with its
legal advisers. In parallel, we will continue to engage with the Operator to
seek a solution and/or explore other options. Further information will be
provided in due course.

 

 The Company is in discussions with its debt provider (current balance owing
USD $1.089 million) and will update the market in due course.

 

United Chief Executive Officer, Brian Larkin commented:

"We are very disappointed that we could not reach agreement with United Energy
Egypt Limited to sell the Abu Sennan concession. We had worked tirelessly from
early December and over the holiday period to finalise the Sale and Purchase
Agreement ("SPA") and engaged external lawyers to assist through the whole
process at a significant cost. We had agreed the commercial terms, however,
based on external legal advice, we were unable to sign the SPA in the form
that United Energy Egypt Limited presented to us. However, we believe the
differences could have been easily resolved and this commercial issue
avoided."

 

END

 

This announcement contains inside information for the purposes of Article 7 of
Regulation 2014/596/EU which is part of domestic UK law pursuant to the
Market Abuse (Amendment) (EU Exit) regulations (SI 2019/310).

 

 

 

 Enquiries
 United Oil & Gas Plc (Company)
 Brian Larkin, CEO                                        brian.larkin@uogplc.com (mailto:brian.larkin@uogplc.com)

 Beaumont Cornish Limited (Nominated Adviser)
 Roland Cornish | Felicity Geidt  | Asia Szusciak         +44 (0) 20 7628 3396

 Tennyson Securities (Joint Broker)
 Peter Krens                                              +44 (0) 020 7186 9030

 Optiva Securities Limited (Joint Broker)
 Christian Dennis                                         +44 (0) 20 3137 1902

 Camarco (Financial PR)
 Andrew Turner | Emily Hall | Sam Morris                  +44 (0) 20 3757 4983

Beaumont Cornish Limited ("Beaumont Cornish") is the Company's Nominated
Adviser and is authorised and regulated by the FCA. Beaumont Cornish's
responsibilities as the Company's Nominated Adviser, including a
responsibility to advise and guide the Company on its responsibilities under
the AIM Rules for Companies and AIM Rules for Nominated Advisers, are owed
solely to the London Stock Exchange. Beaumont Cornish is not acting for and
will not be responsible to any other persons for providing protections
afforded to customers of Beaumont Cornish nor for advising them in relation to
the proposed arrangements described in this announcement or any matter
referred to in it.

Notes to Editors

United Oil & Gas is a high growth oil and gas company with a portfolio
of  cash generative production, development, appraisal and exploration assets
across Egypt, UK and a high impact exploration licence in Jamaica.

The business is led by an experienced management team with a strong track
record of growing full cycle businesses, partnered with established industry
players and is well positioned to deliver future growth through portfolio
optimisation and targeted acquisitions.

United Oil & Gas is listed on the AIM market of the London Stock
Exchange. For further information on United Oil and Gas please
visit www.uogplc.com (http://www.uogplc.com/)

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