Bula Resources has criticised the decision of Davy Stockbrokers to resign as its sponsoring broker. Mr Tom Kelly, the managing director of the small exploration company chaired by former Taoiseach Mr Albert Reynolds, issued a statement to shareholders yesterday.

He said the resignation came "as a surprise to the board, as such a resignation would not be expected without some prior discussion between both parties, particularly as our business relationship had spanned a considerable period of time".

Davy has refused to comment on the resignation, but it has been linked to a decision by Bula to invest in Bahrain. Mr Kelly defended the move yesterday, saying it was in keeping with the company's strategy of acquiring producing assets to fund ongoing working capital requirements.

Bula paid what it considers a refundable deposit of $1.5 million (€1.73 million) towards the acquisition in the middle of last year. Mr Kelly said the company had not been in a position to disclose additional information "to honour the confidentiality between the parties, to safeguard against information leaking to our competitors", while the acquisition was "sensitive from the perspective of future syndication of project financing".

Mr Kelly also addressed the fact that Bula has only two board members which, he conceded, "is clearly not a tenable or a desirable situation from an operational and from a corporate governance perspective".

He said the board was still seeking a non-executive director and a full-time in-house company secretary. In the meantime, Mr Con Casey, an accountant who recently resigned as company secretary, had agreed to continue to act in that capacity.

The company has had to renegotiate the terms of the $100 million purchase of an oil field in the Gulf of Mexico, as a consequence of the September 11th attacks, said Mr Kelly. Bula is also pursuing opportunities in Libya, Iraq and Nigeria. Mr Omar Issa Yazigi has been been appointed general manager (Libya).