The board of Ophir Energy, having unanimously rejected the unsolicited all-cash takeover bid by Indonesian oil and gas group Medco Energi on the basis that the “proposal undervalues Ophir,” is now moving to sell off its interests in the Fortuna field off Equatorial Guinea, including its US$1.2Bn FLNG project, and refocus on its revenue-producing assets in southeast Asia.
“We are in negotiations to rationalise parts of our frontier exploration portfolio,” interim chief executive Alan Booth said on 15 January in a stock exchange announcement. If successful, the negotiations have the potential to bring in cash and reduce Ophir’s future capital spend on exploration.
Although he did not specifically mention the FLNG project which Ophir has been trying to get off the ground for years while chasing suitable lenders, the field in Equatorial Guinea is considered part of the ‘frontier assets’. Before the licence expired, Ophir was seeking “a credible co-investor” for the Fortuna development.
It has been a busy few weeks for Ophir. First, Medco Energi came out of the blue with a takeover offer. The price was however steadily reduced to the 48.5 p per ordinary share that the Indonesian company eventually put on the table on 11 January.
Then in early January the government of Equatorial Guinea refused to extend the Block R licence that encompasses the gas-rich Fortuna field, dashing Ophir’s long-held hopes of developing the acreage and leading to Medco Energi’s lower offer. The group estimates the non-cash cost of the loss of the licence at about US$300M.
Ophir is now regrouping around its southeast Asian business and slashing expenditure. The head office will be shifted out of London to southeast Asia in late 2019 which, the company said, will “yield significant cost savings during the coming year”.
There is now considerable interest in which company picks up the Block R licence.