Shares in Petrel Resources (AIM:PET) jumped 11% this morning following the company's update on its operations in Iraq.
The board announced that Petrel has received the final US$2.5m payment due in relation to the Engineering, Procurement and Supervision of Services (EPC) contract on the Subba and Luhais oil field development. The company retains a 10% profit interest in the project. Completion meetings with the Iraqi authorities are scheduled during May 2011.
Since Subba and Luhais is successfully nearing completion, Petrel is now preparing a detailed proposal to participate in the recently announced Fourth Licensing Round in Iraq. Specific blocks have been identified, with a focus on the oil-prone acreage becoming available from January 2012. The closure date for pre-qualification documents is 19th May 2011.
It should be noted, the 10,000km2 area formerly known as 'Iraqi Western Desert Block 6' is not one of the blocks on offer in the current round. The new, 'Block 6' advertised by the Iraqi authorities is not in any way connected with the 'Western Desert Block 6'. The long term, continued interest of Petrel in this area is known to the relevant authorities in Iraq.
David Horgan, Managing Director, commented:
"We reaffirm our commitment to Iraq. The Subba and Luhais Joint Venture company has paid Petrel the final US$2.5 million due. We maintain a 10% profit interest in the project, but the prevailing circumstances in Iraq, especially delays and materials inflation, means that any profit is likely to be small.
The Subba and Luhais project is now nearing successful completion, after the parties overcame operational obstacles. Successful delivery of all equipment and services to site, without injury, loss of life or equipment is a major achievement for everyone involved with this important project. This experience proves that with goodwill, enthusiasm and unremitting effort, large-scale work can be satisfactorily delivered notwithstanding the prevailing circumstances.
We have identified specific targets in the blocks included in the Fourth Hydrocarbon Licensing Round. Petrel is now completing a detailed submission to the authorities. The closing date for application is 19th May. The blocks on offer are interesting for gas and oil but do not include the 10,000km2 area known as 'Iraqi Western Desert Block 6'.
A successful election in March 2010 led to many months delay in the formation of a new government, which in turn hampered the planned rapid development of Iraqi oil. A new Administration has taken charge, and remaining issues are being resolved.
We expect renewed progress in the coming months to drive forward the development of Iraq and particularly its hydrocarbons industry, to the benefit of all stakeholders. We have a strong balance sheet with over US$6m in cash and are well-placed to take advantage of opportunities.'