Gulfsands Petroleum says that it will no longer pursue the Moulay Bouchta Petroleum Agreement in Morocco (Moulay Bouchta) and consequently to immediately initiate the winding down of the activities of the group in Morocco.
In line with the Company's stated strategy, this will enable Gulfsands to focus its management and capital resources in the Levant region.
As previously reported on June 21st 2017, the Moulay Bouchta contract expired in June 2017 after Gulfsands had received an extension of the duration of the Initial Phase of the Exploration Period of Moulay Bouchta ("Initial Phase"), from Office National des Hydrocarbures et des Mines ("ONHYM"), from two years to three years, together with a revised work programme.
At that time, Gulfsands noted that ONHYM had indicated a willingness to extend the Initial Phase further, from three years to four years through to June 2018. The Group's decision to pursue this extension, and indeed its ongoing participation in Morocco, was conditional upon it finding an appropriate partner to help take the project forward, as Morocco is non-core to the Group's business strategy. The Group has been unable to find a partner and so has now informed ONHYM that it does not wish to continue further with discussions to extend the Moulay Bouchta contract.
As a result of this decision, we understand that ONHYM intends to call in $1.75 million of restricted cash held as performance guarantees under the Moulay Bouchta contract. Further possible penalties could apply, and have been provided for in the Group's subsidiary, Gulfsands Petroleum Morocco Limited.
Now that the Group no longer has any operating assets in Morocco, it intends to proceed with winding down its Moroccan operations and exiting the country.
In respect of the Rharb and Fes Petroleum Agreements which expired in 2015, the Group maintains that $6 million of restricted cash held as performance guarantees under these Agreements was inappropriately taken and retained by ONHYM and should be returned to the Group. These funds were to be used by the Group, in part, to fund any remaining work that the Group's subsidiaries had outstanding in-country, including plug and abandonment and other restoration obligations. The Company continues to pursue this matter with ONHYM.
All Moroccan contracts and activities were held within dedicated subsidiaries, with no parental guarantees in place.
John Bell, Managing Director said:
"Our clearly stated strategy continues to be to focus capital and management resources on the Levant region and to manage down the non-core parts of our business. Today's important and necessary decision is another key step towards achieving that goal"