Oil and gas firm Gulfsands Petroleum has been hit by new EU sanctions in Syria, where the firm operates, which have prevented the group from engaging in activities, including funding activities, connected with its Block 26 fields, until further notice.
As a result, the group does not expect to generate any revenue from its Syrian assets, which make up the majority of its revenue-generating activities.
The amendment is the inclusion on the designated list of inter alia General Petroleum Corporation (GPC), the Syrian government's principal holding company responsible for investments in the oil and gas sector and coordination of oil and gas production by foreign operating companies.
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According to the Block 26 Production Sharing Agreement (PSC), GPC is the Syrian government's representative and effectively the group's partner in the production of oil from Block 26, as is the case for all foreign companies operating in Syria.
As a result, Gulfsands and Emerald Energy, a wholly-owned subsidiary of Sinochem, a Chinese state-owned company and the group's 50% working interest partner in Block 26, have issued a declaration of 'force majeure', a contractual clause that frees both parties from liability if unable to meet the terms of their agreement as a result of events outside their control.
The Syrian state has accepted notice of the force majeure, and in this eventuality, the PSC will not be terminated and the group's rights under the PSC will be preserved.
However, Gulfsands Petroleum has indicated that the Syrian state intends, during the period of the force majeure, to produce oil from Block 26, at its own cost and using its own resources. The government has the power to do this during a period of national emergency, although Gulfsands will be compensated for the oil produced.
The group currently has no debt and substantial net cash balances, which as of 30 November exceeded $120m.
The share price fell 8.46% to 170.5p by 13:21.
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