Saturday 13 Apr 2024
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KUALA LUMPUR (July 17): Velesto Energy Bhd has announced that the Singapore International Arbitration Centre has awarded its subsidiary Velesto Drilling Sdn Bhd an early termination fee of US$19.2 million.

The arbitration case was against Frontier Oil Corp over a dispute related to the breach of a drilling contract in north-west Palawan in the Philippines.

Velesto said the award included interest of US$698,127.78 spread across 249 days, legal costs (S$1.43 million), arbitration cost (S$341,115.80) and other costs (S$22,836.91 and US$178,883.82).

“The board is currently assessing the best approach in enforcing the award against the respondent,” Velesto, which was formerly known as UMW Oil & Gas Corp Bhd, said in a filing with Bursa Malaysia today.

“Considering the lengthy process and duration in enforcing the award, the board is of the view that the above-mentioned award is not expected to have financial impact to the company for the financial year ending Dec 31, 2018,” it added.

Velesto’s lawsuit against Frontier Oil can be traced back to 2015.

In April 2015, Velesto announced that it had filed a lawsuit against Frontier Oil, seeking compensation for the alleged breach of drilling contract, which was inked in September 2014.

Under the contract, Velesto was required to provide a drilling unit and other related services to drill, deepen, side-track, work-over, re-enter, tieback, and any other such operations on a well in the Palawan oilfied.

The services were to be rendered by Velesto until the completion of each well as a producing well or have each well suspended, plugged, or abandoned.

In return for these services, Frontier Oil was to arrange the issuance of a bank guarantee of US$5 million and an advance payment of US$15 million before the deadline of Dec 15, 2014.

However, Frontier did not arrange for the bank guarantee or the advance payment.

Listed on the Main Market, Velesto shares gained 0.5 sen or 1.75%, and closed at 29 sen today, for a market capitalisation of RM2.38 billion.

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