Kea Petroleum has provided an update following shareholder approval in July for the proposed disposal of its oil and gas assets to become an investing company.
The disposal of the company's Puka asset is still awaiting the consent of the New Zealand Petroleum and Minerals, the regulatory body for oil and gas, giving a Section 41 approval to sell Kea Petroleum's 70% share of the PEP51153 licence area.
The company expects to receive this shortly and, subject to that happening, it will have sufficient funds to complete the divestment phase but will need to raise further funds to seek a restoration of trading in its shares and begin reactivation as a shell company with a different activity.
It says it has made progress towards identifying opportunities that it may pursue as an investing company. As disclosed in the previous annual report Kea has been involved in an ongoing litigation with NRG Drilling.
This is in relation to drilling costs it was seeking from Kea. Whilst the company said it viewed the claim as vexatious, and believed that it had a robust defence to the claims and a strong counterclaim, albeit against a company with no assets, and given the decision to cease as an oil and gas company it was decided to place those NZ subsidiaries involved in the litigation into liquidation rather than to run up additional costs associated with a High Court hearing.
The effect of this is that the asset held by Kea Exploration, PEP381204 that includes the Mauku prospect, falls under the control of the Official Assignee who will make a decision on the proposal to sell the asset that had been subject to a conditional heads of terms with New Endeavour Resources.
Kea has sought to keep costs to a minimum and the number of employees has been significantly reduced, down from 17 in 2012 to just six today, including the Board, in order to reduce costs and realign with the company's current size.
Its financial position remains critical and is currently dependent on the forebearance of its creditors and directors who have not been paid. The company will need to raise additional funds for its present needs and also to continue as an investing company following the proposed disposal of Puka.
Trading in the company's shares was suspended from 26 May, pending clarification of its financial position. Pursuant to the AIM Rules for Companies, the admission of the company's shares will be cancelled if its shares are not restored to trading by 26 November.
Consequently, the company is seeking to raise further funds by that date and seek a restoration of trading.