Cash-strapped Northern Spirit sells Belize petroleum interests in Orange Walk and Cayo
Amandala | Northern Spirit Resources Inc. of Canada, the last company to have been granted petroleum concessions in Belize by the Dean Barrow administration in early 2010, is reporting via a press release posted on Marketwire International that it plans to assign its interest in the petroleum contracts to a company whose name it has not yet disclosed.
The contracts are for exploration over nearly quarter million acres of Belize in the Orange Walk and Cayo districts, within blocks previously relinquished by other petroleum contractors. Northern Spirit had announced that it had been trying to raise the equivalent of a million Belize dollars to carry out the work in Belize.
The company’s release published this week cites an announcement by Northern Spirit’s Chief Executive Officer and director, Richard F. Boyd, saying that the contracts which the company had announced in July had been assigned “to an arm’s length undisclosed Calgary-based international oil and gas exploration company.”
The deal is for CAD$100,000 plus a 1.5% gross over-riding royalty [GORR] in favour of Northern Spirit on the lands relating to the PSAs, said Northern Spirit’s release. As Amandala has reported, Northern Spirit’s financial position had been weak even when the Government gave it the petroleum contracts. However, Section 11 of the Petroleum Act, Chapter 225 of the Laws of Belize, demands that a concessionaire has the finances to meet contractual obligations.
We quote: “11.-(1) A contract shall only be entered into with persons who demonstrate a proven ability to contribute the necessary funds, assets, machinery, equipment, tools and technical expertise necessary for the effective performance of the terms and conditions of the proposed contract.
(2) For the purpose of establishing the ability of a particular person as described in subsection (1), the Minister may require the submission of documentation demonstrating the expertise and technical, financial and economic capability of such person.”
Director of Petroleum and Geology, Andre Cho, had interestingly told us when we shared the concerns over Northern Spirit’s lack of finances with him that prospecting companies would usually use their PSAs (contracts) to raise capital to meet their exploration requirements.
At last report, June 2010, Northern Spirit continued to be “in the red,” showing a loss of income, though its cash assets were reported at CAD$73,000 — far less than would be needed for petroleum exploration work — and the company’s equity was listed at CAD$3 million.
According to Northern Spirit’s press release, the company it claims to be selling its rights to “…has also agreed to loan the Corporation [CAD] $185,000 to cover the immediate obligations under the PSAs, which loan is deemed to be paid upon completion of the transfer.
“The Corporation has reserved a right of first refusal to acquire a 20% working interest in the event of a disposition to a third party,” the release adds.
The company notes that the transfer of the PSAs has to be approved by the Government of Belize.
“The Corporation also announces that to conclude the aforesaid transaction, the 1.5% GORR issued to arm’s length parties who were instrumental in the acquisition of the two Belize Production Sharing Agreements and referred to in the July 5, 2010 news release has been converted into 300,000 common shares. The Corporation now has 15,596,856 issued and outstanding common shares,” Northern Spirit’s release added.
Amandala had reported back in July that John Usher, chairman of the Board of the Sittee River Wildlife Reserve in Stann Creek, was one of the parties being awarded compensation in “finder’s fees,” in the form of shares in the company for helping to win their petroleum concession in Belize.
Usher, through his local company – Belize Lake View Properties Limited, was to receive 400,000 common shares as “finder’s fees” – valued, according to a June 30, 2010, release, at 25 cents (Canadian) a piece, or nearly BZ$200,000.
Northern Spirit also said that 100,000 common shares were also to be issued to Canadian Errin Kimball, president, CEO and director of Western Canadian Oil Sands Inc, also as “finder’s fees.”
Northern Spirit had also noted that it would issue gross overriding royalties in the form of a 1.5% of production revenues under the contracts (convertible to shares) to Russel Moore and Mereniuk, and a further 3.5% of production from the oil concessions to both Moore/Mereniuk and Usher’s company, Belize Lake View Properties Ltd.
Back in February, Prime Minister Dean Barrow, Minister of Finance, had announced that the petroleum contracts would give the Government of Belize 10% royalty as opposed to the 7.5% under old contracts, as well as 15% of production sharing revenues on the first 5,000 barrels of oil produced daily.
However, a release published later by the company indicated that this production sharing rate applies only for the first PSA. The second PSA, which is near the country’s first producing field in Spanish Lookout, has softer terms: GOB gets only 10% of production sharing revenues on the first 10,000 barrels produced daily. It is only after the daily production jumps 10,000 barrels that government collects the 15% on the second contract.
