Mr. Andrew Biggs reports
CCL TO SHUT DOWN PRODUCTION AT LS 36-1
Primeline Energy Holdings Inc. has received notification from CNOOC China Ltd. (CCL), the operator of the LS 36-1 gas field, that CCL will shut down production from LS 36-1 as of May 31, 2021, and is suspending performance of its obligations under petroleum contract 25/34, under which Primeline holds its 49-per-cent interest in LS 36-1. Primeline does not believe CCL has the right to unilaterally shut down production at LS 25/34 or suspend performance of its obligations under the petroleum contract and intends to vigorously contest each.
As previously announced on June 15, 2020, the award in the arbitration by the company against China National Offshore Oil Corp. and CCL (together, CNOOC) upheld counterclaims made by CNOOC for amounts of approximately $30-million (U.S.) plus interest. While petroleum contract 25-34 remains in force following the award, Primeline is unable to pay the amounts due under the award and is in default under its credit facility with the syndicate of banks which hold security over Primeline's interest in LS 36-1. Primeline is unable to service the debt to the syndicate as all cash flow from LS 36-1, which is significantly reduced in any event as a result of natural depletion of the field, is being retained by CNOOC and set off of against amounts due under the award. As a result, Primeline is unable to remedy the default under the credit facility and is therefore insolvent. However, although Primeline is in communication with and co-operating fully with the syndicate, the syndicate has yet to determine how it wishes to proceed with regard to enforcement of its security interests.
As previously announced on Sept. 11, 2020, Primeline has applied in the High Court of the Republic of Singapore to set aside the award on the basis of procedural breaches leading to a breach of the rules of natural justice. It has been necessary for Primeline to obtain an order for service of such proceedings out of the jurisdiction of Singapore and Primeline has been informed that the Singapore courts have sent the necessary documents to China in order that the courts in China can effect such service. However, the Chinese courts have not as yet confirmed that they have effected service on CNOOC and therefore no date for a hearing of the application has been fixed.
Primeline confirms that, other than as disclosed in prior press releases, there have been no material business developments since its press release of Aug. 21, 2020, and the filing on Feb. 13, 2020, of the company's latest interim financial report for the period ended Dec. 31, 2019.
We seek Safe Harbor.
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