The San Leon Energy/PetroMaroc study at the Zag block in occupied Western Sahara is delayed and the partners are penalized by Moroccan authorities. PetroMaroc's future is hanging by a thread.
Picture above: The image is most probably taken of Petromaroc-San Leon's seismic study on Zag block in 2011-2012.
The two partners San Leon Energy and PetroMaroc are not working as quickly on the Zag block as they had planned. In its Consolidated Financial Statement
as of 31 December 2015, PetroMaroc writes that the two partners were sanctioned by the Moroccan Ministry of Energy and Mines for not keeping up with its commitments.
A large chunk of the Zag licence is located in the territory under Moroccan occupation. The UN has stated that any further oil search in Western Sahara only can be done after seeking consent from the people of the territory - something which neither San Leon and PetroMaroc have tried to do. In the meantime, they are not keeping up to the speed that Morocco was expecting.
"The Company has accrued $1.2 million penalty costs based on its working interest in the joint venture as the joint venture has not met the minimum work commitments required by the licence and the operator has been notified of the same", PetroMaroc wrote in the report.
In fact, the Financial Statement contains serious concerns about the future of the company.
The auditor, Deloitte, emphasised that there is a "significant doubt about PetroMaroc Corporation plc's ability to continue".
The company itself notes that "[f]uture financings will be required in order to fund the short-term, medium-term and long-term exploration and evaluation programe however, there is no certainty that such financings will be obtained on terms acceptable to management. This uncertainty casts significant and material doubt about the ability of the Company to continue as a going concern."
PetroMaroc, which is a Canada/Jersey registered company, wrote regarding its partnership with the operator San Leon that it is "committed to its percentage share of further geophysical studies and the drilling of one exploration well, subject to receiving and approving a satisfactory proposal from the Operator, as per the terms of the First Extension Period. Following the joint venture not completing the minimum work commitment of the First Extension Period, a twelve month extension to the First Extension Period was agreed by the joint venture, to May 2016. During the twelve month extension the Company continued to seek a mutually agreed technical, commercial and financial proposal to reduce its financial exposure insofar as possible. This extension remains subject to approval by the joint venture partners and the Ministry of Energy and Mines."
From the Financial Statement it seems that the further operations of the company seems depending on the finalisation of the sale and purchase agreement PetroMaroc inked with Sound Energy plc for the PetroMaroc’s onshore Sidi Moktar licences. That agreement is subject to a number of conditions, including permissions and Morocco and at the TSX Venture Exchange in Canada.
“The ability of PetroMaroc to meet these commitments and repay the secured debentures […] and unsecured loan […] is dependent upon raising additional financing by issuing equity or debt securities, or by a partial sale on its working interests with an industry partner", it noted.
If sold, PetroMaroc would still retain certain interest in the development of the Sidi Moktar field.
The directors of PetroMaroc, with licence in the occupied territory, are:
Nicholas Brigstocke, British citizen born 25 June 1942, appointed in 2013
Donald Campbell Deacon, Canadian citizen born 30 March 1948, email@example.com, appointed 2010
Dennis Sharp, born 12 Apr 1937, Canadian citizen born 12 Apr 1937, appointed 2012
Thomas Richard Vukovich, born 10 Sep 1948, Canadian citizen, appointed 2012
Benjamin Yi, born 8 March 1982, Canadian citizen, appointed 2013.
PetroMaroc used to also hold ownership over the Tarfaya licence with San Leon. PetroMaroc sold that interest to San Leon in 2014.