MX Oil posts bigger loss as Mexico costs bite

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Friday, September 23, 2016

London-based MX Oil posted a 1.83mn-pound (US$2.37mn) loss in the first half compared with a 718,000-pound loss a year earlier but continued with its capital raising drive.

"The most significant areas of cost included our activities in Mexico and the costs of fundraising, along with associated professional fees, given the company's requirement to raise significant new funds for investment," MX Oil's chairman Nicholas Lee said in its H1 report.

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The company was awarded four blocks as part of a consortium formed with local firm Geo Estratos in last December's Mexican onshore auction: Pontón, Tecolutla, La Laja and Paso de Oro in the Tampico-Misantla basin.

In March, MX Oil signed an agreement with Geo Estratos to assign the latter a 55% working interest in the three blocks for a total of US$1.8mn.

The agreement included an increase in MX Oil's working interest from 55% to 66.6% in Tecolutla, the block that it had identified as holding the most attractive investment opportunity.

However, given the financial risk associated with signing the contracts for the four blocks and providing bonding, MX Oil would only proceed on the basis that Geo deposited the assignment funds in escrow prior to the signature date and provided the bonding for each block.

As Geo has not been able to do this, the contracts for the blocks could not be signed and the subsequent assignment was unable to take place, MX Oil said in May.

The company said in it was disappointed that it was not ultimately able to secure a license or sell its interests.

"We have, however, gained invaluable experience from this exercise and maintain our belief that Mexico will provide some interesting opportunities in the future and we continue to monitor developments closely," according to the report.

The company also has interests in Nigeria.