Why Ezzaouia is a bad deal for Candax Investors
Ezzaouia is a bad deal for Candax investors, the facts are as follows:
1. Ezzaouia is operated my Maretap (effectively 50% Candax and 50% Tunisian Government). See ETAP website at www.etap.com.tn (ETAP Portfolio) for confirmation of ETAP’s percentage involvement in Maretap.
2. Ezzaouia has three interested parties in terms of Production
ETAP - 55% (Tunisian Government)
Candax Ecumed - 31.4% (A wholly owned Candax subsidiary).
PA Resources – 13.6% (A Swedish based Exploration & Production Company).
3. On the Licence Portfolio webpage of PA Resources website the following percentages are confirmed at Ezzaouia, and then there is a footnote that states:
** Operatorship outsourced to Maretap, a joint venture owned 50% by Candax-Ecumed.
https://www.paresources.se/en/Operations/Licence-portfolio/
4. The fee (if any) PA Resources pays to Maretap for this outsource deal on Ezzaouia is unknown by myself, but it does not have any bearing on why Candax investors are getting a bad deal at Ezzaouia. PA Resources would not pay any more than their fair share of costs, so the outsource deal should cover their 13.6% of field development and production costs, of which Maretap would be the beneficiary.
5. If we count PA resources as neutral in the partnership (i.e. they pay an outsource deal that exactly covers their percentage involvement, then we can remove 13.6% of our annual total cost of field production and development.
6. Therefore, we are left with 86.4% of the total annual costs left to fund, and since Candax (through Ecumed) are 50% partners with the Tunisian Government (through ETAP), Candax is on the hook for 50% of what’s left to pay.
7. Conclusion –
Candax (through Ecumed) pays 43.2% of the Development and Production costs for Ezzaouia, and in return gains 31.4% of Production.
The Tunisian Government (through ETAP) pays 43.2% of the Development and Productions costs for Ezzaouia, and in return gains 55% of Production.
8. Summary –
I’m aware that when you work with the local government in African, the Middle East, or indeed anywhere around the world, there is a price to pay. Regardless of that fact of life, in my opinion Candax and its investors are getting a very bad deal at Ezzaouia.
P.S. The Candax MD&A document for 31st March 2010 states:
=======================================================
Ezzaouia
Ezzaouia is primarily an oil field onshore Tunisia producing small quantities of associated gas. The Ezzaouia field is operated by Maretap, a company owned by the interest holders in the field which include Entreprise Tunisienne d’Activités Pétrolières (“ETAP”), the Tunisian state-owned oil company. Candax owns a 31.4% working interest.
This statement is incorrect and misleading. A company owned by the interest holders in the field would include PA Resources being part of Maretap, which they most certainly are not (see website link above for PA Resources). PA Resources outsources to Maretap, therefore Maretap only has two interested parties, Candax and the Tunisian Government. Consequently, we pay way more than our fair share of costs for our Ezzaouia oil.