Hascol reaches settlement with Mena Energy

KARACHI: Hascol Petroleum Limited, a leading oil company, reached an out-of-court settlement with a UAE-based energy firm to settle the latter’s claims related to a litigation dispute, a bourse filing said on Monday.

“… the board of directors (of Hascol)… has approved an out of court settlement of an ongoing litigation dispute in the English commercial court, London between Mena Energy DMCC and the company (Hascol), based on advice and recommendation of the solicitors and senior counsel representing the company in the litigation,” Hascol said in a notice to Pakistan Stock Exchange. “The settlement involves the company, agreeing, subject to State Bank of Pakistan’s approval, to pay the settlement amount over a period of 18 months in installments of $2,375,000 each on May 19, 2018, July 19, 2018, January 19, 2019 and July 19, 2019.”

The oil company said the aggregate settlement amount of around $9.5 million will not create any liquidity crunch as it has already provisioned majority of the outflow.

“… it (Hascol) has during the year 2017, by way of prudence made general provisioning of approximately Rs600 million in its books which will substantially minimise any adverse impact of the settlement arrangement as above and the company doesn’t anticipate any cash-flow issues for its ongoing business requirements,” the company said. Hascol sold 2.66 million tons of petroleum, oil and lubricant products (POL) last year, up 44 percent over the preceding year, Topline Securities said in a report. POL sales volume of Attock Petroleum Limited stood at 2.19 million tons, followed by Shell (2.02 million tons). Pakistan State Oil led the packs with 14.19 million tons of POL sales in 2017.

Last year, the London High Court ruled in favour of Mena Energy in an arbitration case involved Hascol as the defendant, but the latter denied the ruling was against the company.

“It didn’t prescribe the amount of claim payable to Mena, nor did it rule anything about Hascol’s counterclaims,” an official said then.

The arbitration case was concerned with the two transactions: one related to the sale of fuel oil and the other gasoil supply by Mena Energy that is engaged in the trading of crude oil and petroleum products to Hascol Petroleum in November 2014. Mena Energy demanded damages it suffered as the Hascol Energy couldn’t open a letter of credit for the gasoil shipment, while Hascol pressed its counterclaims for the late delivery of fuel oil. It is unclear whether or not global energy and commodity trading company Vitol Group, which owns 25 percent stake in Hascol, was aware of these claims at the time they acquired stakes in the oil company.

In February 2016, Vitol acquired 15 percent stake in Hascol and increased its shareholding to 25 percent in November 2017.