10:21:50 EDT Mon 24 Jun 2024
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Primeline gets consent order: It's time to exit China

2023-09-26 14:58 ET - News Release

Mr. Andrew Biggs reports


Further to Primeline Energy Holdings Inc.'s press release of Jan. 5, 2022, announcing service upon Primeline by the syndicate of banks which provided the loan facility for finance of Primeline's share of the development cost of the LS 36-1 gas field of a statement of claim in an action commenced by the syndicate against Primeline in the Ningbo Maritime Court in China for payment of outstanding principal and accrued interest owing under the loan facility, and Primeline's intention not to defend in the action and to co-operate with the syndicate in order to obtain a consent judgment (as production at LS 36-1 had been shut down, and Primeline therefore had no source of revenue with which to repay the loan), the court has issued a consent order terminating enforcement proceedings against Primeline's wholly owned subsidiaries, Primeline Petroleum Corp. and Primeline Energy China Ltd., on the grounds that, upon investigation, the court determined that neither subsidiary has any executable property. The syndicate had earlier with Primeline's co-operation obtained a consent judgment against the subsidiaries in mediation proceedings commenced after service of the statement of claim, and begun enforcement proceedings. The subsidiaries' only material asset is the petroleum contract with CNOOC under which development of LS 36-1 had taken place, which had been charged to the syndicate as security for the obligations of the subsidiaries under the loan facility, and during enforcement proceedings CNOOC had advised the court that it had decided to abandon LS 36-1 due to resource depletion, and submitted an abandonment plan which would cost hundreds of millions of renminbi to the relevant PRC ministries and departments for review and approval. Although enforcement proceedings have been terminated, the obligations of the subsidiaries to pay the judgment, and Primeline's guarantee of the obligations of the subsidiaries under the loan facility, remain in place, as does the petroleum contract. CNOOC will retain its right under the petroleum contract to move against Primeline for payment of its share of the abandonment costs. Primeline will now be terminating its operations in China.

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