Mikaila Adams
Editor-News
Ophir Energy PLC, London, is no longer operator of Block R, which contains the Fortuna natural gas discovery, and will not be granted an extension to the joint production contract, the Ministry of Mines and Hydrocarbons of Equatorial Guinea confirmed. Ophir was issued a notice of the decision in December 2018 after the company’s exploration license expired. The block has been returned to the state.
Block R covers 2,450 sq km at the end of the Niger Delta, 140 km west of Bioko Island, in 600-1,950 m of water, and contains six commercial discoveries. Fortuna field is estimated to hold 1.3 tcf of the block’s estimated 3.4 tcf of recoverable gas reserves.
Ophir’s work program began in 2008 resulting in the Fortuna and Lykos discoveries. The company had planned a large floating LNG installation and associated subsea structures, but investment for the project did not materialize (OGJ Online, Nov. 7, 2014).
In late 2018, the company was in discussions with PT Medco Energi Global Pte. Ltd. about a possible cash offer to acquire the issued and to be issued share capital of Ophir, but the proposal was rejected by Ophir’s board.
The ministry’s decision is “disappointing,” given the “amount of effort and cost dedicated to the delivery of the project,” said Alan Booth, Ophir’s interim chief executive in a statement Jan. 11. An additional noncash impairment of the asset, some $300 million, is expected in Ophir’s full-year financial results following the impairment taken in the half year results reported in September 2018.
Booth said in a Jan. 15 statement that the company is in negotiations “to rationalize parts of our frontier exploration portfolio with the potential to not only bring in cash, but also importantly reduce our future exploration capital commitments and further improve our liquidity position.” He said, “We remain mindful of the potential value of our gas assets in Tanzania, notwithstanding the uncertainty over timing for their development.”
Capital expenditure for the year is expected to be $150 million assuming various farmouts are closed successfully, Ophir reported. Some $110 million is earmarked for development and production, focused on growing production and cash flow, including Bualuang and Madura (Meliwis development) (OGJ Online, Mar. 20, 2018). The remainder will be allocated for exploration, predominantly exploration commitments as the company manages its exit from its deepwater portfolio. The company is seeking to reduce those commitments further where possible.
