Roxi shares slump as partner cancels payment

March 03. Interactive Investor

Roxi shares slump as partner cancels paymentRoxi Petroleum (RXP) was nursing hefty losses on Thursday, after its partner Canamens BNG cancelled a $12 million payment.

The AIM-listed oil and gas explorer told investors that the Norwegian company will not make the final payment of $11.97 million under the second stage of the sale and purchase agreement concerning the BNG field in western Kazakhstan.

As a result, Canamens will forfeit a 6.25% interest in the BNG contract area to Roxi, bringing its share down to 28.75% and consequently bumping up Roxi’s stake to 29.7%.

Chief executive David Wilkes said: “We have been aware that Canamens’ shareholders have been conducting a strategic review of its operations. It is disappointing that Canamens has decided not to invest the full consideration under the agreed terms of the existing sale and purchase agreement.”

Jan Kielland, chief executive of Canamens, said the decision followed a move to refocus its resources, but added that the company continued to look forward to working in an “optimal way” alongside its partners to explore and develop the hydrocarbon potential in the BNG block.

Roxi first acquired a 58.41% stake in the field three years ago, and subsequently agreed to sell 35% to Canamens in January 2009.

The deal, carried out in two stages, firstly gave Canamens the opportunity to gain a 23% interest in the field in return for a $32 million funding commitment plus a cash payment of $2 million. This was followed up with an option to invest a further $23 million in return for a further 12% interest.

While Roxi said the decision was unlikely to have an immediate impact on BNG, it would have to seek additional funding further down the line.

Charlie Sharp, analyst at Matrix Group, said: “The near-term operations are unlikely to be significantly impacted, as much of the seismic acquisition and processing has already been completed.

“However, the longer-term development of BNG will now require additional funding and Roxi and its other partner, Baverstock, will, in due course, look for additional financing from industry sources.”