Continental Energy wins summary judgment against China Wisdom

US junior E&P firm Continental Energy Corporation said Tuesday it had received a summary judgment in favor of Continental Energy and its partners and against its former Bengara-II Block farm in partner, China Wisdom International (HK) Ltd.

Continental Energy, together with its partner GeoPetro Resources Company and its jointly owned subsidiary Continental-GeoPetro (Bengara-II) Ltd., were claimant in a civil suit brought against China Wisdom International (HK) Ltd. The suit charged that China Wisdom had defaulted and breached contract by failing to fulfill its drilling obligations under a March 3, 2003 farm out agreement regarding the Bengara-II Block production sharing contract area in East Kalimantan.

The farm out agreement clearly stated that the consequence for China Wisdom's failure to timely perform its drilling obligations was termination of the farm out.

In a ruling handed down by the Eastern Caribbean Supreme Court in the High Court of Justice in the British Virgin Islands, the court agreed with Continental's petition and declared that the farm out agreement between the claimants and China Wisdom dated March 3, 2003 is terminated.

The court ordered China Wisdom to re-transfer 20,000 common shares of joint venture subsidiary Continental-GeoPetro (Bengara-II) Ltd., a British Virgin Islands (BVI) company, 12,000 shares to Continental Energy Corporation and 8,000 shares to its partner, GeoPetro Resources Company. The shares were transferred to China Wisdom by Continental and GeoPetro on the condition that China Wisdom would perform its drilling obligations under the farm out agreement. Should China Wisdom fail to voluntarily make the re-transfer by August 31, 2004, the court has ordered the BVI Registrar of Companies to sign transfers on behalf of China Wisdom, concluding the re-transfer of these shares to Continental Energy and GeoPetro Resources. Additionally, the court ordered China Wisdom to pay the claimants' legal costs in the amount of US$7,700.00.

In a statement issued from Continental's Dallas office, VP & CIO James D. Eger said: "We are pleased with the court's decision. It puts an official end to any involvement China Wisdom and its agents, officers and directors might claim to have in the Bengara-II PSC, or with Continental Energy or GeoPetro Resources. We initiated the action in the BVI Courts against China Wisdom to clear title to shares of our joint venture subsidiary Continental-GeoPetro (Bengara-II) Ltd. We are currently in serious discussions with two new prospective farm in partners, and the court's decision and order have removed a possible obstacle to concluding a new farm out."(*)