Petrel Resources shares climb on progress in Iraq

Positive news of Petrel Resources' (LON:PET) progress today in Iraq has been a long time coming and sent the stock climbing nearly 10 percent in morning deals.

After years of red-tape, delays and headaches, not to mention the uneasy formation of a new government in Iraq, the AIM-listed company revealed that the final payment due for its services on the Subba and Luhais oilfield (southern Iraq) - $2.5mln - had arrived.

The wheels of development in Iraqi oil are also starting to drive forward again, said Petrel.

"The Subba and Luhais project is now nearing successful completion, after the parties overcame operational obstacles," declared Petrel's managing director David Horgan this morning.

The Irish independent can now do what it set out to do - explore for oil - and not simply provide development services, as it had been at Subba and Luhais.

The firm is also now back on the hunt for oil and gas targets and also announced today that it was taking part in Iraq's recently announced fourth licensing round, where it has already identified targets. The deadline for bids is May 19 this year.

Stalemate lasted almost two years before a breakthrough. In April 2010, Petrel revealed it had, at that stage, resolved all outstanding issues related to the field - and a new deal had been struck between Petrel, Makham (its Iraqi partner) and the Iraqi Ministry of Oil that would be carried out over a year.

The Petrel/Makman joint venture was to complete the oilfield development, with Makman assuming primary responsibility for the final phases of the work, and, with no further liability for the Subba and Luhais fields, Petrel would turn its attention to exploring the oil-rich region.

It was to receive a total cash payment of US$7m and, crucially, it would retain a 10 per cent profit-share from the two oilfields while having no further liability or exposure to the project.

Horgan said today that Petrel's commitment to the project had now been reaffirmed as the final US$2.5 million came through.

"Successful delivery of all equipment and services to site, without injury, loss of life or equipment is a major achievement for everyone involved with this important project," he said.

"This experience proves that with goodwill, enthusiasm and unremitting effort, large-scale work can be satisfactorily delivered notwithstanding the prevailing circumstances."

Regarding the gas-rich Western Desert area, where the company wants to explore, Horgan said it had not been included in the recent licensing round.

"The blocks on offer are interesting for gas and oil but do not include the 10,000km2 area known as 'Iraqi Western Desert Block 6'.

Despite there being an election in March 2010, which had already been surrounded by controversy, the parliament did not open until June 14 and after months of tense negotiation, the new government was formed on 11 November.

"A successful election in March 2010 led to many months delay in the formation of a new government, which in turn hampered the planned rapid development of Iraqi oil," said Horgan.

"A new administration has taken charge, and remaining issues are being resolved. We expect renewed progress in the coming months to drive forward the development of Iraq and particularly its hydrocarbons industry, to the benefit of all stakeholders. We have a strong balance sheet with over US$6m in cash and are well-placed to take advantage of opportunities," he added.

Petrel is focused on Iraq and has had a presence in Baghdad for years and has successfully built a strong Iraqi and international team. It was initially established in the 1980s and it has long been a fixture of the AIM market after it joined the LSE’s junior market from the old OFEX market in 2000.

As at 12.10pm the company's share price was 7.09 per cent, or 1.12p - and changing hands at 17 pence.