The partners will be subject to a payment for not meeting their work commitments at the Filipino licence
Singapore-based Jadestone Energy and Total have voluntarily surrendered and terminated Service Contract 56 (SC56) in the Sulu Sea in the Philippines.
In this connection, Jadestone’s fully-owned subsidiary Mitra Energy (Philippines SC-56) and operator Total E&P Philippines, a subsidiary of Total, have notified the Philippines Department of Energy of their decision.
Jadestone Energy expects to record a one-time impairment charge of nearly $50.5m for relinquishing the licence.
The amount is a total of historical capitalised exploration expenditures on the SC56 block, which is mainly associated with the company’s previous management.
Jadestone Energy president and CEO Paul Blakeley said: “We remain focussed on our strategy of delivering value from producing fields and near-term developments in the Asia Pacific region, while avoiding early-phase greenfield exploration plays such as SC56, requiring multi-year capital programmes prior to production and cashflow.
“Nor would the major investments in new pipelines and facilities fit our sustainability objectives which include a focus on maximising use of existing infrastructure.
“SC56 was a legacy asset inherited from the previous management and only had option value through a carried well.”
In December 2017, Mitra SC56 had filed a arbitration case against its partner Total alleging that the latter breached their 2012-dated farm out agreement.
One of the accusations made by it on Total was that the latter did not drill an exploration well on the deepwater Halcon prospect in the SC56 licence.
Total holds a stake of 75% in the offshore licence
Total holds a stake of 75% in the offshore licence, while Jadestone Energy holds the remaining 25%.
In January 2020, Jadestone Energy got a favourable ruling from the tribunal, which concluded that Total had breached the farm out agreement. The tribunal ordered Total to pay over $11m to its partner to settle the issue.
Following the relinquishment and termination of SC56, the partners will have to make a payment for their unfulfilled work commitments at the offshore Filipino licence.
Jadestone Energy’s share will be met partly from the proceeds of the arbitration ruling.