02-12-2013, 07:50 AM
Interoil U-turn on Colombia sale
Steve Marshall 11 February 2013 14:52 GMT
Cash-strapped Interoil has pulled the plug on plans to divest its key production asset in Colombia and is now looking to raise funds for an ambitious drilling drive, despite facing a debt mountain.
The Oslo-listed company is backpedalling on further disposals in the South American country after last week agreeing the sale of a pair of exploration licences to Trayectoria Oil & Gas, while it is also still looking to farm down part of its 100% stake in the LLA-47 block in the Llanos basin.
Explaining the change of tack, chief financial officer Erik Sandoy told Upstream the company now intends to focus on maximising the value of the Puli C production block while shifting away from exploration.
However, the move failed to arrest the slide in Interoil’s freefalling share price, which plummeted by almost 41% on Monday to Nkr3.47, having dropped by 69% over the past year.
Interoil had earlier received indicative offers after initiating the process to sell all or part of its assets in Colombia last year but said it decided they “would not have yielded sufficient proceeds to repay the company’s debts” that currently total around $97 million.
The under-financed company now intends to carry out an equity issue of around $50 million as part of a refinancing exercise to fund a 68-well production drilling campaign over the next two years intended to boost reserves and output at the Puli C block.
“In the board’s opinion this is the only solution that will secure any value to the company's existing shareholders,” Interoil said in a statement.
The company aims to triple current output from the block to around 3000 barrels per day by the end of 2014 through targeted annual investment of $29 million, with an additional $14 million to be invested in 2015 to maintain plateau production.
The drilling effort is intended to exploit untapped resource potential in the block estimated at 5.1 million barrels, much of which has not been developed due to funding constraints.
Interoil has also identified exploration upside potential at three prospects in the block – Mana West in the Montserrate reservoir and Ambrosia North and South in the Doima formation.
The company holds an effective 60% working interest in the block, with state-owned Ecopetrol on 30% and Sismopetrol with 10%.
Meanwhile, it has a commitment to drill eight exploration wells on the LLA-47 block by February 2015, with drilling of at least five prospects targeting prospective proven and probable resources of 14.1 million barrels due to kick off following processing of 3D seismic set to be shot in the first quarter.
Interoil also has production from two blocks in Peru, Block III and Block IV, that yielded 3000 barrels bpd last year but is waiting on formal extensions of the licences before committing to further investment to tap additional resource potential.