Shares in Nautilus Minerals slumped on Friday afternoon after the offshore oil and gas group revealed that operations at Solwara 1 in Papua New Guinea may be delayed, and that there's a dispute over the ownership of the project.
The group said that there may be a delay in the finalisation of funding for a production support vessel to be used at the project and a potential delay to the programme for the vessel build.
The problem is that Nautilus's strategic partner Harren & Partner - who were both expected to form a separate joint venture company to own and operate the vessel - is no longer able to contribute the full amount of the equity as previously agreed.
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
"The change to Harren & Partner's position, linked to a tightening of banking rules in the current European crisis and the depressed shipping market, may delay the finalisation of the terms of the third party funding and result in a consequential delay to the programme for the vessel build," Nautilus said in a statement.
In a separate press release, Nautilus revealed that it is in a dispute with the Independent State of Papua New Guinea as it its obligations to complete an agreement signed last year to acquire a 30% stake in Solwara 1. The government says that Nautilus has not met certain criteria on which completion of the agreement is dependent; "Nautilus refutes these assertions," the company said.
Nautilus says that the State must pay its share of costs incurred in the Solwara 1 development otherwise it will have to carry these costs itself. "This may lead to Nautilus needing to slow or defer the build programme for project equipment, which would have consequential impacts on the scheduled commencement of operations and overall project costs."
Shares were trading 16.17% lower at 111.5p by the close.
BC
