SDX Energy has withdrawn from a concession in Cameroon’s Rio Del Rey Basin, after the government rejected a request for a one-year extension to enable completion of a detailed analysis of the results from the Manatee-1X well it drilled in March. Other companies opting to relinquish acreage last week included DualEx Energy International in Tunisia and Chariot Oil & Gas in Mauritania.
SDX Energy had held a 35% working interest in the Bakassi West concession, which is operated by Dana Petroleum. SDX said last week the reason for requesting an extension was that while the well had found 26 metres of gas-bearing rock in the wellbore, results were considered to be inconclusive and logging had not been possible.
The local authorities had rejected Dana’s request for a one-year extension. Instead, they asked the companies to enter a second exploration period, which would have required additional well commitment. As a result, “SDX declined to continue to move forward with this project,” it said in a statement.
Instead, the company will focus on its four Egyptian concessions. SDX’s president and CEO, Paul Welch, said the first three months of 2016 had been challenging, for the company and industry. The company listed recently on London’s Alternative Investment Market (AIM), which should pave the way for an active work programme.
“The Bakassi West concession is not a core asset to our business and we do not believe it would have been prudent to continue investing in it,” Welch said. The block had been acquired in October 2015 as a result of the merger between Sea Dragon Energy and Madison PetroGas. “Whilst the concession was an exciting opportunity, it was fundamentally non-core, and our subsequent exit allows the company to focus all of our efforts on growing our high margin production business in our core assets across Egypt.”
Meanwhile, AIM-listed Chariot said it had opted not to enter the first renewal phase at the C-19 licence, in Mauritania.
“A fundamental part of Chariot’s risk strategy is partnering through the major investment phases in our exploration programmes. This independent, third-party validation ensures that we invest the company’s capital on the best quality opportunities. Whilst we have been unsuccessful in attracting third-party funding for an exploration well in C-19, we have substantially achieved our aspiration of zero-cost exploration on this licence. While it is clearly disappointing, it is important that the company maintains discipline in the management of risk, allocation of capital and in developing those parts of the portfolio likely to yield drilling opportunities,” said Chariot’s CEO, Larry Bottomley.
The company shot 3,500 square km of 3-D seismic on the block, in addition to reprocessing legacy 2-D seismic and carrying out seabed coring. There was interest from a number of potential partners, it said, but they did not reach a transaction in the required period.
The block is prospective, Chariot said, but the decision to drop it was taken in order to focus on portfolio management and capital discipline. Mauritania had provided an extension in May 2015, at which point the company said there were four prospects on the block, with the PA-1 and MA-1 targets having gross mean prospective resources of 431 million barrels and 588 million barrels respectively.
Cairn Energy farmed-in to the Mauritanian block in August 2013, taking a 35% stake for a payment of around US$26 million to cover past costs.
On June 13, Toronto-listed DualEx Energy International said it was surrendering its Bouhajla permit, in Tunisia. The local government had said no further extensions would be provided for the first phase of the permit. Given there was insufficient time to carry out the required work to enter the next phase, DualEx said, it will surrender Bouhajla. This will come due on August 7 of this year.
DualEx said this had been driven by its inability to find a joint venture partner on the area. As such, the company will focus on projects in Western Canada. It received a one-year extension on Bouhajla in August 2015, with a commitment to shoot 130 square km of 3-D seismic.
Companies and countries face tough choices in how tough a bargain to strike on already licensed acreage. As has been seen, governments are often willing to concede ground when times are tough but will only go so far and must judge whether companies will actually be able to follow through on commitments made.