I'm not so certain that the $14 million was for preparation work other than Tullow applying what they thought they could against the cap to avoid throwing good money after bad.
The language in the 10K was as follows: "From September 2013 until June 30, 2014, costs applied against the $100 million carry were $14.1 million. The timing of the well and the total costs are uncertain. We will be responsible for our 37% interest share of the cost in excess of the remaining gross carry amount. Additionally, Tullow agreed to pay our participating interest share of future costs for the drilling of an appraisal of the initial exploration well, if drilled, up to a gross expenditure cap of $100 million."
In the prior release, it was noted: "Sale of Interest to Tullow
On December 31, 2012, we closed a sale to Tullow of a 40% gross interest in the Concession. As consideration, we received $27 million from Tullow as reimbursement of our past costs in the Concession and, as additional consideration, Tullow agreed to: (i) pay our participating interest share of future costs associated with joint operations in the drilling of an exploration well in at least 2,000 meters of water in the deep water fan area of the Concession, up to a gross expenditure cap of $100 million; and (ii) pay our share of costs associated with an appraisal well of the initial exploration well, if drilled, subject to a gross expenditure cap on the appraisal well of $100 million. Tullow was obligated to pay its 40% participating interest share of costs associated with the Concession as of November 20, 2012, the date of execution of the SPA. Tullow began to pay our costs attributable to the Concession on September 21, 2013, and Tullow will continue to pay our costs, subject to the gross expenditure cap of $100 million, until 90 days following the date on which the rig contracted to drill the exploration well moves off the well location. The $27 million payment was received by us on December 31, 2012 and was recorded as a reduction in unproved oil and gas properties, net of transaction costs of approximately $3.3 million."
Hence, I suspect this is simply wishful thinking that Tullow has mobilized anything since Tullow indicates in their mid-year slides they plan to start drilling in 1H2015 provided the following guidance: "Fatala is estimated to spud between late 2014 and mid 2015, with significant follow-up prospectivity identified. Once the current issues regarding the licence that were detailed in March 2014 have been resolved a more specific
spud date will be confirmed."
I don't see the $14 million as much of anything except what Tullow is required to pay to mobilize and then demobilize. Ironically, it's referenced as $14.3 million in a different section.
I sense that this is a warning that they will sell another part of the remaining 37% to come up with cash once they run out or once Tullow gives them a firm date. That won't happen until the DOJ and SEC lawsuits are done and that's settled. Tullow won't do a thing until their concession is legally binding without any type of claw back by the DOJ. They can wait unlike HDY.
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