Pitkin Petroleum Limited (PPL), a subsidiary of Pangilinan-led PXP Energy Corporation, has entered into a ‘settlement agreement’ with the subsidiary corporate-entity of its Australian partner Karoon Energy Ltd. paving the way for the resolution of their dispute over a petroleum exploration concession in Peru.
In a disclosure to the Philippine Stock Exchange (PSE), PXP Energy indicated that Karoon Energy “agreed to pay $9.6 million in cash to PPL in full and final settlement of all claims by Pitkin Peru and its associates in connection with Block Z-38.”
PXP Energy qualified that the ‘deed of settlement and release’ inked by the parties “will be effective upon the receipt of the settlement sum by PPL within three (3) business days upon the signing of the deed.”
PXP Energy has 53.43-percent shareholdings in PPL; and it’s the latter’s subsidiary Pitkin Petroleum Peru Z-38 SRL (Pitkin Peru) that has been involved in petroleum exploration venture in that Latin American territory.
In May this year, Pitkin Petroleum had formally served a ‘notice of dispute’ to the Peru subsidiary of Karoon Energy and pursued its claims against the Australian partner because the latter allegedly breached drilling commitment in their awarded petroleum block.
PXP Energy specified that the dispute stemmed from the Australiam firm’s “breach of obligation to Pitkin Petroleum Z-38 SRL to drill a second well in Peru Block Z-38 located in offshore Peru.”
As emphasized, the Perupetro license for the exploration of hydrocarbons in Block Z-38 was granted in 2017 by the government of Peru.
In the joint operating agreement (JOA) between Pitkin and Karoon’s KEI (Peru Z-38) Pty Ltd Sucursal del Peru or KEI, it was stipulated that the latter “has an obligation to drill a second well, if not in the third period of the exploration phase under the contract, then in the fourth period of the exploration phase.”
As explained, this is part of the required fourth period work program in the Peru petroleum exploration venture for Block Z-38.
The agreement between Pitkin and KEI further prescribed that if “the second well is not drilled in the period of the exploration phase,” then there are conditions that the Australian firm must adhere to.
Firstly, KEI will need “to satisfy or procure satisfaction of the contractor’s guarantee obligations under Clause 3.10 of the contract until such time as the second well has been drilled in the fourth exploration phase.”
Secondly, the Australian firm has “to pay Pitkin’s participating interest (25%) share of all expenditure – as defined in the farm-in agreement – incurred under the contract and JOA during the required fourth period work program until such time as the second well has been drilled and all drilling operations relating to the second well have been completed.”
Pitkin Petroleum was eventually informed though that KEI was no longer interested to enter the fourth exploration phase for Block Z-38, hence, suggesting that it “will not comply with the second well obligation or the Pitkin carry obligation” – and that became the subject of the dispute resolution entered into by the parties.