PXP Energy Corp. said on Monday that its subsidiary is likely to terminate an agreement with a unit of Australia’s Karoon Energy Ltd. on the drilling of a well in Peru, following the latter’s alleged breach of obligations.
In a stock exchange disclosure, Manuel V. Pangilinan-led PXP said Karoon Energy unit KEI Sucursal del Peru, which operates Peru Block Z-38 offshore in northwest Peru, is supposed to drill a second well during the third exploration phase, as mentioned in its contract.
If the well is not drilled during this time, KEI must continue drilling activities until the fourth period of the exploration phase.
KEI is also required to pay PXP unit Pitkin Petroleum Peru Z-380 SRL’s participating interest of 25% in all expenses incurred until the second well is completed.
Pitkin Petroleum Peru Z-380 SRL (Pitkin Peru) is a unit of Pitkin Petroleum Ltd. (Pitkin Ltd.), which is under Philippine-listed PXP.
In a letter dated April 23, KEI indicated that it would not take any action to extend the term of the contract or any exploration phase, including by seeking to enter into the fourth period of the exploration phase, implying that the firm breached its obligations.
Pitkin Ltd. claimed that KEI “deprived” Pitkin Peru of funding for the fourth exploration phase and for the drilling of a second exploratory well.
“Pitkin Peru has sent a notice of dispute to KEI claiming damages of over $100 million for KEI’s aforesaid breach of its obligation to Pitkin Peru,” PXP said.
Pitkin Ltd., a 53.43%-owned subsidiary of PXP, holds a 25% participating interest in Peru Block Z-38 located in the Tumbes Basin.
On Monday, shares in PXP improved by 1.77% or 14 centavos to finish at P8.07 apiece. — Angelica Y. Yang