Leni Oil & Gas takes rival to British courts over Malta sale

Oil firm Leni Oil & Gas has launched legal proceedings against its former partner in an exploration licence off Malta, after that partner brought in big player Genel Energy to look for oil on Malta's Area 4 block.

Leni said in a statement late this morning that it has "today issued proceedings against Mediterranean Oil (MOG) and Gas Plc in the High Court of England and Wales in regard to the Company's 31 July 2012 sale of its 10% interest in Malta Area 4 PSC to MOG."

Commenting about this latest development, LGO's chief executive Neil Ritson said: "we have repeatedly asked MOG to answer simple questions explaining the facts at the time the Company agreed to sell its interest and since we have not had what we regard as satisfactory answers, LGO's board has found itself with no option but to seek relief through the Courts."

David Lenigas, the Company's Chairman also commented that "the Company's strong view is that it was misled by MOG at the time LGO sold its 10% interest on 31 July 2012. As MOG won't confirm the facts, we will now let the Court decide on the matter."

Last August, LGO announced that Leni Gas and Oil Investments Limited (LGOI), a subsidiary of LGO, had agreed to sell its interest in the Malta Area 4 Production Sharing Contract (PSC) to Phoenicia Energy Company Limited (PECL), a subsidiary of MOG.

PECL agreed to pay LGOI a consideration of US$1 for the Interest with an effective date of 1 January, 2012. In addition, PECL was to assume liability for LGOI's residual costs arising under the 'Joint Operating Agreement' between the Parties associated with the acquisition of 3D seismic data in 2011 estimated to be of the order of US$20,000 for the to end-2011.

Subsequently MOG announced on 23 August 2012 that its wholly owned subsidiary, PECL, had entered into a conditional farm-out agreement with Genel Energy Plc (Genel), in relation to PECL's 100% interest in Area 4 Offshore Malta; only 23 days after LGO agreed to sell its working interest to MOG for US$1.

MOG also announced on 21 December 2012 that it had signed the two key contracts with Genel that enable Genel's acquisition of a 75% working interest in MOG's wholly owned subsidiary, PECL. This follows the Government of Malta granting a one year extension to January 2014 of the first exploration phase of the PSC for Malta Offshore Area 4.

In a reply posted on its website last September, MOG said that its board refuted the suggestion in LGO's announcement that MOG or PECL may have misrepresented its position to LGO.

"As such, MOG has instructed its legal advisors to address directly the matters raised by LGO, as appropriate, and to uphold and enforce MOG's rights," it said.

Meanwhile, the Maltese government has approved former BP boss Tony Hayward's Genel Energy acquisition of 75% of participation rights in Area 4 offshore Malta.

Hayward, who spent his entire career at BP until the Deepwater Horizon accident in the Gulf of Mexico which cost 11 lives in 2010, wiped tens of billions off the value of the business and brought his tenure at the helm of BP to an abrupt end, acquired the interest in the Production Sharing Contract held by Phoenicia Energy Company Limited - a wholly owned subsidiary of Mediterranean Oil & Gas Plc - through his new company, the London listed Genel Energy Plc.

According to a government spokesman last August, MRA was informed that Phoenicia Energy Company Limited were in the final stages of discussions with a reputable exploration and production company for the farm-out agreement.

"MRA was only informed of the company - Genel Energy Plc - a few minutes before the agreement was signed," the spokesman said, adding however that MRA still has to complete its due diligence before government approves the assignment. The process was however concluded last week and Genel was officially approved as a participant in the exploration bid off Malta.

Prospects

According to MOG, the 3D seismic data in Area 4 which Hayward has acquired has a potential of 200 to 300 million barrels of oil to exploit.

For Mediterranean Oil & Gas's chief executive Bill Higgs, the deal was a "welcome reward" for his hard work since he joined in January.

Higgs, who was at Chevron for 30 years and oversaw the construction of one of the largest man-made structures in the world, the BBLT oil well in Angola, was drafted after a tricky time at Mediterranean. The oil and gas firm was forced to refinance last year when an Italian offshore drilling ban led to near-disaster.

This ban is now set to be lifted as Italy's technocrat government led by incumbent Prime Minister Mario Monti seeks to revive his country's dire financial situation. The race for oil in the Mediterranean basin is on, and Malta is set to become one of the protagonists.