Ophir Relaxed on Tanzania Exit Strategy
Ophir Energy CEO Nick Cooper is relaxed over plans to divest or sell down the firm’s remaining 20% interest in gas-rich Tanzania blocks 1 and 4. The two Mafia Deep Basin blocks have 17 trillion ft3 (481.5bn m3) of gross contingent reserves, of which a fifth are net to Ophir.
The UK-based independent secured a 100% interest in the two blocks ten years ago, farmed out 60% to BG Group in 2010, and then sold a further 20% for $1.3bn to Singapore-based Pavilion Energy in 2013. In 2014 BG (since this February owned by Royal Dutch Shell) and Tanzania block 2 licensees Statoil and ExxonMobil agreed to co-develop a combined large onshore LNG complex at some future time.
Ophir acknowledges that being an equity partner in what could be a high-cost LNG development does not fit its business model, which CEO Nick Cooper summarised at its March 10 results briefing as "minimal capital allocation on developments, maximum exploration returns."
“Shell took the reins in Tanzania of the BG portfolio in mid-February,” Cooper told a 2015 results briefing for analysts on March 10. “It’s still early to see the Shell impact on the project. But we have enjoyed a good dialogue with Shell."
Describing Tanzania as "still a live project", the Ophir CEO said the change of government there has seen "a fresh impetus to facilitate the project; as to whether it turns into a top gear or 2nd or 3rd gear project, time will tell. But we need either to find an earlier exit or a low-capital option going forward.”
Ophir's carrying costs on its Tanzania assets are “to all intents negligible now,” he said, adding that Ophir expects a final investment decision in 3 to 4 years’ time on the Tanzania LNG project: “It’s a real project… we will look to maximize value for shareholders in 2 to 3 years from now.”
Shell did not disclose much of its forward strategy in east Africa in its annual report, also released March 10. The section dealing with upstream African assets largely focuses on its Nigerian production and exploration assets, plus its 25.6% interest in the six-train 22mn metric tons/yr Nigeria LNG venture. However Shell adds just one more sentence: “We also have interests in Algeria, Egypt, Gabon, Namibia, South Africa and Tanzania.”
Ophir made a 2015 pre-tax operating loss of $376mn, after pre-tax impairments owing to the lower oil price environment of $169mn and exploration write-offs of $149mn. That contrasted with a 2014 profit of $288mn. But it had net cash at year-end 2015 of $355mn, as it maintains its target of final investment decision (FID) in mid-2016 on its Fortuna floating LNG project in Equatorial Guinea.
"Ophir has demonstrated in Tanzania that it can monetise exploration success and we expect to provide further evidence of our ability to monetise our successes when we make a FID on the Fortuna FLNG project in 2016," wrote Cooper in his CEO review accompanying the 2015 results.