Europa Oil and Gas faces tax headache

27th Sep 2011 08:10

AIM-listed tiddler Europe Oil and Gas has been hit by a tax bill of €730,000 by the Romanian authorities following its sale of the Bilca gas field in 2007.The Romanian government says value added tax should have been paid on the transaction.The oil and gas company, which had revenue that barely topped £3m in its last financial year, intends to submit an appeal and claims it has received advice from its tax advisers that it has a strong technical argument for a counter claim.The market had less faith in the advice of the tax advisers, and marked the shares down a penny to 9.5p.The group said: "The appeal process will likely take several months, thus having an effect on cash flow. The board will be assessing all the company's projects to prioritise capex [capital expenditure] spend in the meantime." The news came as the company updated the market on the progress of its 2D seismic acquisition programme on its Brodina and Cuejdiu blocks in Romania. Drilling on the Voitinel-2 appraisal well, in which Europa has a 28.75% stake, is due to start in the very near future. This well follows the Voitinel-1 discovery, drilled in 2009, which flowed 3 million standard cubic feet per day. Voitinel-2 is a low risk appraisal well intended to prove a minimum gas in place number for commercial development, well below the upside potential for the play of 415 billion cubic feet.The company is also finalising an agreement with a farm in partner for the Brates Licence in Romania where it plans to deepen Barchiz-1, which was drilled in late 2010 but failed to reach the primary target, the firm said. The anticipated terms of this farm-in arrangement will see Europa's future share of the well cost being fully carried up to an agreed cap. BS & NR