Jadestone Energy has started arbitration proceedings against Teikoku, a subsidiary of Inpex, related to Jadestone's acquisition of an interest in Block 05-1 PSC, offshore Vietnam.

Jadestone, then known as Mitra, in August 2016 signed a definitive sale and purchase agreement (SPA) with Teikoku for the acquisition of a 30 per cent working interest in Block 05-1 PSC.

The agreement was for a total cash consideration of $14.3 million, subject to normal closing adjustments.

On 22 February 2018, Inpex delivered to Jadestone a purported notice of termination of the SPA.

This happened despite Teikoku having just received on 9 February 2018 the waiver by Petrovietnam of their statutory pre-emption rights, held under Vietnamese law; and direction from Petrovietnam to complete and submit all documents necessary to effect the transfer of interest to Jadestone.

Jadestone rejects Inpex's termination
At the time, Jadestone noted it had not accepted Inpex's alleged termination and views the obligations of both parties under the SPA as continuing.

Jadestone and Inpex engaged in negotiations over an extended period in 2018 and 2019, which the company pursued with the objective of securing its interest in Block 05-1 PSC.

Jadestone has assessed its options, including advice from Queen's Counsel, as the SPA is subject to English law, and has determined that it is in the best interest of shareholders to challenge Teikoku's purported termination of the SPA and to seek specific performance by Teikoku to fulfil its obligations under the SPA.

To that end, Jadestone has filed a notice of arbitration with the Singapore International Arbitration Centre in accordance with terms of the SPA.

Paul Blakeley, Jadestone President and CEO, said that Jadestone intends to complete its planned acquisition of a 30 per cent interest in Block 05-1 from Inpex.

Blakeley added: “Prior to the purported termination, the parties had worked together and made very substantial progress toward closing the deal, a process which included Inpex requesting that the deal not be terminated even after the long stop date had passed, and with the objective of obtaining Petrovietnam's waiver of their pre-emptive rights, which was then achieved in early February 2018.

“While commencing arbitration is never an easy decision, we have exhausted all avenues to come to an amicable conclusion, and now feel Inpex's continued unwillingness to complete the SPA constitutes a material breach of their obligations, to the detriment of potential value for Jadestone shareholders”.

Blocks 05-1b and 05-1c are located 350 km offshore Vietnam in the Nam Con Son basin in water depths of around 120 meters.

The Block 05-1 PSC holds two fully appraised gas and condensate discoveries, Dai Nguyet and Sao Vang, in close proximity to the Nam Con Son gas transportation pipeline and existing production facilities.