Ophir Neutral on Fortuna, Bullish on Santos
The interim CEO of UK-listed Ophir Energy, Alan Booth, said in a first-half 2018 trading update July 12 the company would make it a priority to "explore every avenue to create value from our Fortuna FLNG project" offshore West Africa
" We are, of course, especially conscious that our Fortuna licence expires at the end of this year; however, we remain determined to deliver value both to our shareholders and the government of Equatorial Guinea," he said, adding that Ophir is in discussions on partnering and financing with "credible and well-financed third parties."
Two months ago the Equatoguinean government warned that, unless Ophir takes FID on Fortuna by end-2018, it may lose operatorship or have the project scrapped.
Depending on how Ophir's discussions progress, the carrying value of the Block R licence ($604mn as at end-December 2017) may need to be reassessed as part of the interim reporting process, said Booth.
One of the partners, OneLNG, dissolved itself in May. "Although this decision was disappointing, we continue to believe that Fortuna is a high quality asset and, along with Golar, we are focused on trying to secure a new partner with the financial strength likely to be required to unlock the project financing," said Booth.
Another priority is to complete the $205mn acquisition from Australian independent Santos and integrate the southeast Asian assets effectively and efficiently into the organisation. These include a producing oil field in Vietnam and the Madura Offshore and Sampang production-sharing contracts in Indonesia, which contain a number of producing gas fields.
Ophir's average production over the period was 11,400 barrels of oil equivalent (boe)/day which was "marginally ahead of expectations." The Santos transaction will add 13,500 boe/d of production, which would take full year production on a proforma basis to 25,000 boe/d, and add around $90mn of operating cash flow. 2018 full year pro forma capital expenditure (excluding the cost of acquisition) for the Santos assets is expected to be $25mn.
“Each of these priorities is precisely aligned with our near term strategy to become a self-sustaining business. We will continue to rebalance our portfolio towards a stronger production base and higher cash flow generation in order to give ourselves a broader opportunity set no matter how the external environment evolves. The Santos assets grow and diversify our production base and mark an important step towards achieving cash flow sustainability," Booth said.
Meanwhile the search for a new CEO is "making good progress and a number of highly experienced and qualified external candidates have been identified. The board will of course provide further updates as and when appropriate,” he said.
In Indonesia, production from the Kerendan gas field averaged 17.2mn ft³/d, "broadly in line with expectations. In addition, we advanced discussions with the local regulator on a revised gas price for the existing gas sales agreement of $5.65/mn Btu." Gross production from the Sinphuhorm gas field was 77mn ft³/d for the half-year, ahead of expectations, and was sold at an average $5.20/'000 ft³.