3D Energi Limited (ASX: TDO), an oil and gas exploration company with projects in offshore Victoria and Western Australia, has announced a trading halt due to a funding shortfall related to its Otway Phase 1 Drilling Program. The company holds a 20% participating interest in the VIC/P79 exploration permit. The drilling program, which included the Essington-1 and Charlemont-1 gas discovery wells, has incurred significantly higher costs than initially projected.
According to the announcement, 3D Energi has an outstanding balance of approximately US$2.5 million related to joint venture cash calls. The company currently does not have the funds to meet this obligation, and a default notice has been issued by the Joint Venture operator, with a remedy period expiring on February 6th. Additional forecast drilling program expenditure of approximately US$5.3 million is due on the same date, potentially triggering another default notice if unpaid.
The cost overruns were attributed to an extensive wireline logging and formation testing program at Essington-1, undertaken after a significant gas discovery. For Charlemont-1, weather-related delays and overpressured gas necessitated a revised well design, additional casing, and regulatory approvals, extending the drilling schedule by approximately 14 days. The company has suspended trading on the ASX while it addresses its funding position and the implications of payment default on its ongoing interest in the permit.
The Joint Operating Agreement contains standard mechanisms to address payment defaults, including notice, cure, cost reconciliation processes, and potential dilution or buy-out of a party’s participating interest. The company is currently undertaking post-well analysis and integration of data acquired during Phase 1.
