By Tara Patel
Sept. 4 (Bloomberg) -- Etablissements Maurel & Prom SA, a French explorer focusing on Africa, is nearing a decision to buy natural-gas reserves in Tanzania from Artumas Group Inc. after extending a purchase option to carry out due diligence.
“We haven’t discovered anything that would lead us not to do it,” Chief Executive Officer Jean-Francois Henin said Sept. 1 in a telephone interview. “We needed more time to find the people to do the operation.”
Maurel and Cove Energy Plc last month pushed back the deadline to buy the Tanzanian licenses from Calgary-based Artumas to Sept. 18. A purchase of the permits, in which Maurel would have a 70 percent stake, would form part of Henin’s strategy to buy “distressed” assets from companies hurt by last year’s drop in crude prices.
The $12 million transaction would enable Paris-based Maurel to start output in the East African nation and study building a liquefied natural gas plant to process the fuel for distribution.
“In Tanzania we are building the basis for an industrial project, in which Artumas assets have their place,” Henin said. Investment from an “oil major” would probably be needed to construct an LNG plant, he added, without saying whether the company was in talks with any potential partners.
Under the asset-purchase agreement, Maurel would assume operatorship of Artumas’s Mnazi Bay gas permit, whose reserves may be combined with any found at the Mafia Deep ST well and another known as MOH-1, which are undergoing tests, Henin said.
Results from the Mafia drilling may be known as early as next week, he said.
Artumas Financing
Artumas is seeking to raise funds as the global recession curbs demand for oil and gas, dragging down prices and squeezing profit margins for producers. The company said in January it would cut 40 percent of head-office employees and expected further reductions by April. Its net loss widened to $118 million in 2008 from $27.5 million a year earlier.
Maurel has also sold assets the past two years, divesting units in Colombia and the Republic of Congo as part of a strategy to find and develop new hydrocarbon resources while selling proven, older fields.
Maurel, which intends to increase output in Gabon to replace production lost through the asset sales, has said it will probably miss a target this year to return to levels recorded before the Congo sale.
Drilling Success
The company’s drilling program through mid-2010, which includes wells in Gabon, Congo, Tanzania and Colombia, has had a success rate of about 50 percent so far, Henin said. “The value of Maurel & Prom rests squarely with new oil and gas discoveries,” he said.
Entitlement production will rise to about 20,000 barrels of oil a day by the end of 2009 from 10,300 barrels a day in July, according to Henin’s forecasts. The company pumped about 30,000 barrels a day before the sale of the Congo wells to Eni SpA.
Henin, who owns 24 percent of Maurel, said his personal challenge is to more than double proven and probable reserves to 250 million barrels of oil equivalent from 110 million barrels. “It’s a goal, not a promise to shareholders,” he said, without giving a timeframe. Henin, who turned 65 this year, has no plans to sell his stake in the company, he said.
Maurel shares were cut to “hold” from “buy” on Aug. 28 by Aurel BDG analyst Julien Guez, who reduced his price target to 13 euros from 16 euros, citing an absence of “short-term catalysts.” Drilling results from Mafia and Gabon’s OMTI development could change this, he said.
Shares Follow Oil
Maurel slumped 44 percent in Paris trading in the six months after oil rose to a record in July 2008. Crude traded in New York sank 72 percent in the period as the economic slowdown eroded demand. Maurel has since rallied 50 percent, and traded at 12.63 euros, up 0.6 percent, at yesterday’s close.
Maurel’s sale of Hocol Petroleum Ltd. in Colombia to Ecopetrol SA for $742 million helped finance payment of 2010 exchangeable bonds, as well as exploration and production this year. The company issued a convertible Oceane bond maturing in 2014 for 298 million euros and reported a net cash position of 431 million euros at the end of June.
To contact the reporter on this story: Tara Patel in Paris at tpatel2@bloomberg.net
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