Introduction
Following up on last week’s column we have set out below a Table summarizing the Profit and Loss Statement of Mid-Atlantic for each of the years 2013 (part-year) to 2018 extracted from the company’s audited financial statements lodged with the Commercial Registry, a statutory obligation under the Companies Act. The Company was incorporated since 2013 but did not sign a Petroleum Agreement until 2015, the kind of information anyone would expect to see in financial statements but which is noticeably missing.
The Table shows that the Company has incurred expenditure over the first five years and a bit over $270 million Guyana dollars of which 80% was spent on Administrative Expenses with the bulk of that expenditure going on Employee Benefits and Consultancy Fees. A perusal of the 2018 financial statements show that 90% of the $75 million in expenses reported in the Statement of Profit and Loss was incurred on Administrative Expenses.
The Balance Sheet is not any more informative or impressive and this may be because the Company, with Ministerial approval has become no more than a shell. That process, in which French oil giant Total and its American counterpart ExxonMobil now control the lion’s share of the blocks awarded to Mid-Atlantic. The significant amounts in the Balance Sheet are Cash and Bank Balances of $227 million, a negative balance on Reserves representing losses incurred, borrowings of $216 million and nearly $300 million in amounts payable to Related Parties and what is stated only as Other Payables.
No expenditure, no exploration
Article 10 of the Petroleum Agreement requires an Annual Rental Charge of US$90,000 but it is not apparent whether this payment has been made or how it is accounted for. Yes, the Company has farmed out most of its blocks but the financial statements ought to provide more information to readers for a better understanding of how contractual revenues to the State are accounted for.
Clearly no exploration has been undertaken by this Company nor does it seem as though the Company has any such intention. It is expected that Total and ExxonMobil’s local company Esso Exploration and Production Guyana Limited (EEPGL) will account for any prospecting expenditure in their own books. Before looking into where EEPGL and how EEGPL has accounted for its expenditure (see Column # 69), it is interesting to inquire where Mid-Atlantic has accounted for the proceeds of the two farm-outs to other oil giants.
Esso’s accounts
I have expressed similar concerns about Esso’s sharing its gigantic blocks with Hess and CNOOC-Nexen and its failure to account for the revenues therefrom. What has compounded the situation with EEPGL is that that Company seems to be claiming its gross pre-contract and pre-production costs before any operating costs are deducted to arrive at profit oil. It is incredible and shameful that this Company has not been called out by the Government “to clear the air”.
So this brings us now to the EEPGL’s statement for 2018. As Column #69 narrated, EEPGL is working part of the Canje Block originally granted to Mid-Atlantic but there is no way of knowing whether any of those costs are accounted for in EEPGL’s books to be claimed as pre-production cost once the oil starts to flow. Exxon’s man was yesterday featured in a Stabroek News exclusive interview telling Guyanese how great his company is and how the absence of ring-fencing is good for Guyana! Please Mr. Henson, we Guyanese are not all stupid to have our intelligence insulted.
Conclusion
It seems clear that some oil companies, big and small, are making rings around those who ought to protect our interest and national patrimony. The result has been that for the country, it has been one disaster after another. Raphael Trotman, the first APNU+AFC oil Minister not only knew nothing but was less than truthful to the country. When the portfolio was removed from him and retained by David Granger, it was hoped that the impact would at least be mitigated. Those hopes have been dashed and Granger’s assessment that Dr. Mark Bynoe did not know about petroleum but would know people who know has turned out to be at least half-true.
Next week, Column # 71 will look at Esso’s 2018 financial statements and Exxon man’s exclusive interview.
