Nu-Oil partner in Canada lodges court claim for work programme costs

Nu-Oil & Gas updated the market on Friday, on production lease 2002-01(A), which was held by its wholly-owned Canadian subsidiary Enegi Oil, reporting that it had been working with PVF Energy Services to agree an appropriate way to progress the asset.

The AIM-traded firm said that followed issues which arose during the work programme carried out by PVF under the terms of the production sharing agreement that was signed between Enegi and PVF on 30 January 2017.

Despite the company's efforts to find a solution in accordance with the terms of the PSA, it said it received notice on 10 July that PVF submitted a statement of claim to the Supreme Court of Newfoundland and Labrador General Division on 26 June against Enegi, for costs incurred by PVF in carrying out the work programme, claimed to be around CAD 1.12m.

The production sharing agreement “clearly” stated that PVF would carry out the work programme “at its sole cost, risk and perils”, the Nu-Oil board said, and that costs properly incurred in carrying out the programme were reimbursable out of production from a well and not by Enegi.

As a result, the board said it believed there was no merit in the claim.

Further, it said the production sharing agreement provided for a “clear process” for the resolution of any dispute or claim arising out of the agreement.

PVF had not followed the prescribed process, Nu-Oil asserted on Friday.

It said it had taken initial legal advice, and was considering its options, one of which was, on that basis, to challenge the jurisdiction of the court in the matter.

The firm said it did not believe that defending the claim, against its subsidiary, would have any significant impact on its future activities.

“The company has been attempting to work with PVF in good faith to find an appropriate way forward for Garden Hill, despite the operational issues encountered, and we are surprised and disappointed that PVF has chosen to take this action, in contravention to the terms for dispute resolution and cost recovery in the agreement signed by the parties,” said Nu-Oil executive chairman Graham Scotton.

“The company is obliged to notify the market of this situation irrespective of our opinion on the basis for the claim.”

Scotton said the situation would take time to resolve, however he said he did expect it to affect its ongoing efforts to secure new assets or have any impact on the company's funding requirements.

“I look forward to being able to reappraise the options for Garden Hill, as part of Nu-Oil's planned portfolio, once this dispute is resolved.”