The settlement relates to consultancy work Petrel carried out for the Iraqis on the Subba and Luhais oilfield development project in the south of the troubled country in 2005.
The share move boosted Petrel’s market capitalisation to £25.68m (€29.8m). The country’s oil ministry recruited Petrel – which has a long-standing presence in Iraq – on a service contract to aid local company, Makman in developing the project. However, the Dublin-headquartered and AIM-listed firm ceased work on the project 18 months ago after not being paid by the Iraqi government for its services.
However, the company has now reached a settlement with the Iraqi Oil Ministry that will see it receive $7m in outstanding fees over the coming 12 months. Petrel will also gain a 10% royalty fee, the actual amount it receives being dependent on exactly how much oil is found at the site. Petrel has received $2m of the payment this month and will receive the remaining $5m in two $2.5m tranches next year.
Meanwhile, the Petrel-Makman joint venture will now complete the Subba and Luhais oilfield development services contract after a 20-month delay. “In accordance with our joint-venture agreement, Petrel now passes primary responsibility for the final phases of work to our Iraqi partners. We have... swapped our 50% holding for a 10% profit interest. This removes all uncertainty from the contract,” said Petrel’s managing director David Horgan.
Petrel will use the money it receives from the settlement to further progress its existing Iraq-based projects. “Petrel is an oil explorer, not a services contractor, so we are pleased to be able to re-focus on growing our exploration interests in Iraq, which in our opinion remains the world’s best oil province,” added Mr Horgan.