Barra Energia serves mandatory withdrawal notice to Dommo Energia


Barra Energia do Brasil Petróleo e Gas Limitada (“Barra” or “Company”) confirms that a Mandatory Withdrawal Notice (the “Notice”) was formally delivered to Dommo Energia S.A. (“Dommo”), one of the partners in block BS-4 (“Block BS-4”), on Friday, October 13th, 2017. Contrary to what Dommo states in its Material Fact issued one week later, on Friday, October 20st, 2017, Barra’s action is lawful, fair and in line with best industry practices. The action taken by Barra is also strictly in accordance with clear and longstanding provisions contained in the Joint Operating Agreement (“JOA”) governing the concession of Block BS-4, which was freely entered into by all the partners.

Barra has been extraordinarily supportive of Dommo over an extended period of time. Barra has paid its pro rata share of the very many cash calls on which Dommo has defaulted in Block BS-4, including those related to the Atlanta oil field development (the “Atlanta Oil Field Development”). In addition, Barra has provided substantial credit support on behalf of Dommo in relation to a material services contract associated with the Atlanta Oil Field Development, a contract that includes substantial early termination penalties.

The Atlanta Oil Field Development in Block BS-4 is an extremely challenging project, requiring substantial additional capital investment before any production may be achieved. A number of operational and financial uncertainties still remain as to whether or not this project will be successful.

With no indication whatsoever that Dommo has any intention to promptly cure its outstanding defaults or to pay on time its share of these critical cash calls to get to first oil, it is clear that Dommo made the conscious decision to renege on any additional financial exposure and pass the substantial risk that the project still bears onto other parties. This is precisely the situation to which the default provisions of the JOA under Block BS-4 are intended to apply. In filing the Notice it is thus clear that Barra acted in accordance with its contractual rights to protect itself from Dommo's persistent defaults.