Sonangol Faces $2bn-Plus Claim
US independent Cobalt is claiming over $2bn damages from Angolan state Sonangol in respect of its cancellation last year of a $1.75bn deal.
In its 1Q results filed May 8, Cobalt noted that in March 2017 it filed a notice of dispute to Sonangol relating to the "purchase and sale agreement executed in August 2015 for the sale ....to Sonangol" of Cobalt’s 40% working interest in blocks 20 and 21 offshore Angola.
Cobalt said it later filed a request for arbitration (RFA) with the International Chamber of Commerce (ICC) against Sonangol for breach of the agreement.
It added: "Through this arbitration proceeding, Cobalt is requesting an award against Sonangol E.P. in excess of $2 billion, plus applicable interest and costs. Cobalt also filed a separate RFA with the ICC against Sonangol P&P seeking recovery of over $174mn, plus applicable interest and costs, representing the joint interest receivable owed to Cobalt for operations on Block 21 offshore Angola. Unless resolved to Cobalt’s satisfaction, Cobalt intends to vigorously prosecute these claims in arbitration and seek all available remedies in law and equity."
Sonangol HQ in Luanda (Photo credit: the company)
At full year 2016 results in March 2017, Cobalt recorded a $1.63bn impairment in Angola and threatened state Sonangol with arbitration for aborting the 2015 deal relating to oil-rich blocks 20 and 21 which also include at least one sizeable gas discovery, but had not yet actually made the referral.
Cobalt on May 8 said its 1Q2017 net loss was $306.3mn, many times its $46.6mn loss in 1Q2016, which it attributed mainly to a write-off of oil exploration expenses at Shenandoah in the US Gulf of Mexico. However it noted that its cashflow included "$250mn of Angolan sale proceeds received pursuant to the purchase and sale agreement with Sonangol, but excludes $159.2mn in receivables owed to us by Sonangol."
Last summer Sonangol disclosed that its 2015 profits had slumped by 66%, because of the collapse in oil prices, crippling its ability to make acquisitions. Observers are left wondering why Sonangol agreed to do the deal in August 2015 when oil prices and revenues had been obstinately low for two years, and why it dithered for a whole year before telling Cobalt it wanted out. Sonangol chair Isabel dos Santos was appointed in early June 2016.