Gulfsands to stick with Syria despite sanctions

UK independent posts 23% profit hike despite force majeure in December

Gulfsands reported a 23% hike in net profit, a sign that its interests in Syria are worth keeping.
Gulfsands reported a 23% hike in net profit, a sign that its interests in Syria are worth keeping.

Gulfsands Petroleum is staying put in Syrian despite financial sanctions imposed by the EU against the country forcing the UK independent to declare force majeure on its Syrian commitments.

“We believe the situation in Syria will be resolved in due course at which time the Company will be able to resume operations. In the interim, it is our intention to maintain our presence in Syria in full compliance with the European Union sanctions,” Gulfsands CEO Richard Malcolm said in a statement accompanying the firm’s financial results for 2011.

The company also plans to consolidate its interests in Tunisia and seel its remaining assets in the US this year.

Gulfsands reported an after-tax profits hike of 23% to $55.1 million (2010: $44.7 million).

74.5 of the company’s 76.3 mmboe of P2 reserves are in Syria, where a continuing political and humanitarian crisis has hampered what would otherwise have been a bumper year. Sanctions and prior instructions to restrict production from the Syrian government pushed the firm’s annual average group working interest production down by 17% to 8,542 boepd (2010: 10,308 boepd).

Gulfsands owns a 50% working interest and is operator of Block 26 in North East Syria, with the current exploration licence due to expire in August 2012. The group’s interest is held via Dijla Petroleum Company (“DPC”), which was blacklisted last year under the EU sanctions regime.

In his statement accompanying the results, Chairman Andrew West branded the situation in Syria “bewilderingly complicated and constantly evolving.” Gulfsands declared force majeure on its production sharing contract at Block 26 on 11 December 2011.

The company previously announced its intention to add a further non-Syrian asset to its portfolio, with West confirming that the firm is “leaving no stone unturned in our continuing efforts to find attractive opportunities to deploy our financial and technical firepower into "fast track" geographical diversification.”

The company said the sanctions “had a significant impact on the financial statements.” The company has ceased all production and exploration activity in Syria, home to its chief producing assets. No security issues have been reported at the fields, and the firm is keeping its Syrian staff on its payroll. The company says it it is sitting on $125 million in cash, enough to rise out the political turmoil in Syria for some time.

The company has deferred its cash bonuses to directors until the company is operating again.

Speculation about a takeover from a Chinese or Russian bidder was sufficient to push Gulfsands’s stock on London’s AIM market up 5.6% at 156.65p.

The firm’s shares are 1.3% down today, trading at 150p at the time of writing.

 

 

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