KAR has received a Dispute Notice from JV partner Pitkin Petroleum at its exploration asset (Block Z-38) in Peru. The dispute stems from a JV agreement to drill an additional exploration well in Peru, which KAR did not go ahead with after the conclusive failure of the first well to encounter any hydrocarbons (at all). Pitkin estimates damages of not drilling the extra well at >US$100m, which we expect it would struggle to justify if pressed. We do however see a modest settlement as reasonable given the agreement. Viewing the development as likely to be immaterial, we maintain an ADD rating.
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