The Group has been attempting to either farmout or sell the Astrakhanskiy Licence since the first quarter of 2008. While the Group has been in discussions with various parties as of, and subsequent to, 31 March 2010 regarding the potential farmout or sale of the Astrakhanskiy Licence, the Group believes significant uncertainty exists as to whether the Group will be able to meet its work programme commitments or obtain a deferral of the well commitment to 2011. Due to this uncertainty, the Group’s accounts reflect the impairment of the capitalised cost of the Licence to nil at 31 March 2010, resulting in a non-cash charge of $116.2 million.
In July 2010, the Group received a letter from the MOG notifying the Group of the termination of its subsoil use licence for the Astrakhanskiy Block in Western Kazakhstan due to the Group's failure to comply with the work obligations stipulated under the Astrakhanskiy Licence. The letter does not affect the Group's principal asset, the Blocks A&E Licence area.
The Group believes the MOG's position reflects a broader policy change regarding the treatment of subsoil use licences behind in their work obligations. The Group had already decided not to drill an exploration well on the block without a partner. The receipt of the letter from the MOG gives the Bondholders the right to redeem the Company’s Bonds. The Company has received assurances from holders of greater than 85% of the Bonds that they will waive this redemption right and plans to convene a meeting of its Bondholders in September to obtain a formal waiver of the redemption right. In addition, Macquarie has already provided a waiver of the potential event of default resulting from the termination of the Astrakhanskiy Licence. Accordingly, the Group does not believe the MOG's action will have any material adverse effect on its liquidity, financial condition or prospects.
