PXP Energy Corp. and its subsidiary Forum (GSEC 101) Ltd. have put on hold activities for two petroleum exploration service contracts as directed by the Energy department until the issuance of the “necessary clearance to proceed.”
In a disclosure on Monday, PXP said “this was the first time” that the company, along with Forum, learned of the requirement for clearance from the Security, Justice and Peace Coordinating Cluster (SJPCC) before undertaking the work obligations that the Department of Energy (DoE) has required.
PXP is the operator under Service Contract (SC) 75 and Forum is the operator under SC 72.
SJPCC is composed of the Department of the Interior and Local Government, Department of Foreign Affairs, Department of National Defense, Department of Justice, and the Office of the Presidential Adviser on the Peace Process with the National Security Council as secretariat.
SC 75 was awarded by the DoE on Dec. 27, 2013 and covers an area of 6,160 square kilometers in the offshore northwest Palawan basin.
On Sept. 9, 2015, the department granted force majeure to SC 75’s work commitments effective December of that year until the DoE notifies PXP to resume its petroleum exploration-related activities.
SC 72 within Recto Bank is a concession acquired by Forum, which became its operator in April 2005. It is located in the West Philippine Sea, west of Palawan Island and southwest of the Malampaya gas field. Forum plans to drill two wells over the Sampaguita field once the force majeure is lifted.
The force majeure was lifted by the DoE on Oct. 14, 2020.
In the disclosure, PXP said the directive from the DoE to put on hold exploration activities was received on April 6.
“PXP and Forum, however, understood the suspension to be temporary,” it said, considering that the DoE has been keen for exploration activities to be conducted since the lifting of the force majeure.
It added that both operators had been closely coordinating with the DoE regarding the planned exploration activities, which are part of their respective work obligations under SC 75 and SC 72.
PXP said the company and Forum, through their letters dated April 8, expressed their willingness to resume activities immediately and no later than April 11. But if they have not received written confirmation from the DoE by April 10 that they can resume their activities on April 11 at the latest, they will consider the suspension of work issued by the DoE “to be indefinite.”
It said a force majeure event “will entitle them to be excused from the performance of their respective obligations and to the extension of the exploration period under SC 75 and SC 72.”
It said PXP and Forum have not received advice from the DoE that they can resume their exploration activities, prompting them to terminate all the supply and services agreements to carry out their work obligations.
PXP added that the decision was meant “to mitigate losses arising from what now appears could be an indefinite suspension of exploration activities.”
PXP holds a 50% interest in SC 75. Forum Energy Ltd., in which PXP holds a direct and indirect interest of 79.13%, has a 70% participating interest in SC 72 through its wholly owned subsidiary Forum. PXP has a total economic interest of 54.36% in SC 72.
On Monday, PXP shares at the local bourse slid by five centavos or 0.92% to close at P5.40 apiece. — Ram Christian S. Agustin