LONDON (ShareCast) - (ShareCast News) - MX Oil has abandoned its much-hyped Mexican development plans when its local partner failed to stump up the cash for an asset swap deal, leaving the company focused on the sale of its Nigerian asset about which it is feeling some seller's remorse.
MX, which had in December secured four Land Contract Areas (LCAs) in Mexico's otherwise prolific Tampico-Misantla basin, had recently agreed with local partner Geo Estratos whereby the London-listed company was going to sell its 55% stake in three of the licences for a large share of the fourth, Tecolutla, for $1.8m.

However, Geo has not deposited the funds by the agreed date and so not only can the contracts for the LCAs not be signed but the subsequent assignment of these LCAs by the Mexican government cannot now take place.

Furthermore, a recently hired competent person, ERC Equipoise, told the company that developing Tecolutla was unlikely to be economic, despite the MX's management having said in March that it believed this was the most attractive investment opportunity.

MX has therefore decided "it would not be in the company's or shareholders' best interests to proceed with any of these licences particularly given the inherent risks associated with their funding in general and uncertainty surrounding its partner's funding ability".

Chief executive Stefan Olivier said: "It is clearly disappointing that our Mexican partner could not come up with the necessary funds and that Tecolutla has proved to be less attractive than first thought.

"We have therefore had to make a tough decision not to proceed with the Mexico licences at this time, in order to avoid exposing the company to undue risk and protect our existing investment that has now commenced production."

This leaves MX focused on it indirect investment in the Aje Field offshore Nigeria, which recently produced first oil and which the company had agreed to sell for $18m to GEC Petroleum Development Company.

However, again MX has not yet received payment for the deal. GPDC was due to make a first payment to secure this option this month but has assured that it "remains committed to making this acquisition and is working hard to put the necessary funding in place".

Olivier and his board colleagues are optimistic about future oil prices and the upside potential of the second phase of the Aje development, so concluded that "another viable option would be for the Company to retain this investment".

Another update from the company has been promised "in due course".

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