Ophir Keeps Going Despite OneLNG: Update
(Adds analyst comment at end)
Ophir Energy is continuing to develop its Fortuna LNG project despite the announcement by Golar LNG regarding the dissolution of the OneLNG joint venture with Schlumberger, it said May 31. Fortuna has missed several targets for taking a final investment decision (FID).
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"Whilst it is disappointing that Schlumberger will no longer be part of the partnership group, Golar and Ophir remain actively engaged in senior level discussions with a number of counterparties over a financing solution for the project. Furthermore, as part of Ophir’s contingency planning for the project, Ophir has already held informal discussions with other, well-capitalised, potential partners for our Fortuna project. Following the announcement re OneLNG we have now formalised discussions and are actively moving forward with them. Ophir remains focused on maximising value creation for shareholders from the monetisation of the Fortuna discovery," Ophir said in its statement.
Ophir this month announced the departure of Nick Cooper, the CEO, mentioning his failure to meet several deadlines for securing financing.
The Equatorial Guinean government had earlier warned that, unless it could reach FID by year-end, Ophir might either lose Fortuna operatorship or alternatively the project could be scrapped.
Golar, announcing its quarterly results May 31, said "that recent LNG price increases enhance the already solid financial returns expected from the Fortuna project. Despite an agreed development plan and extensive efforts over the last twelve months by OneLNG and Ophir management, it has not been possible to finalise an attractive debt financing package. This, together with other capital and resource priorities, has resulted in a decision from Schlumberger to end their participation in the project. Golar and Schlumberger, as a result of this, and based on the structure of the BP project, plan to wind down OneLNG and work on FLNG projects as required on a case-by-case basis.
"Efforts to find the optimum capital structure that maximises value for all Fortuna project stakeholders, including the government of Equatorial Guinea, continue. Golar does not see extensive issuance of new equity at current share price levels as an attractive financing solution. Use of alternative yards that are able to provide financing and the potential introduction of a new industrial partner are, however, being considered. No guarantee can be given that attractive financing for the project can be achieved and Golar does not intend to provide any further market updates before any possible financing alternative is fully committed."
Analysts at GMP First Energy took a dim view of the project. In a briefing note May 31 it said the announcement "jeopardises the project in our view. The presence of Schlumberger provided technical credibility to the development. While Ophir and Golar are now talking to another potential industrial partner, the project is facing delay. This has to be put in the context of Ophir’s upstream licence expiring around the end of 2018."