Ophir impairs Fortuna project, plans to move to Asian HQ

UK-based Ophir Energy has impaired the value of its Fortuna FLNG development in Equatorial Guinea and decided to downsize its London office in order to transition to an Asian HQ.

Ophir has been working to find financing and make a final investment decision on the Fortuna FLNG project for a while now but has suffered a number of setbacks in the process.

As previously reported, E. Guinea authorities allegedly gave Ophir an ultimatum to either find financing by December and make a final investment decision for the long-stalled Fortuna FLNG project, or risk losing the acreage there.

The Fortuna FLNG development also suffered a setback in 1H 2018 with the dissolution of OneLNG and the subsequent effective withdrawal of Schlumberger from the Fortuna project.

In its half year results report on Thursday, Ophir said: “Given the uncertainty around the value we can ultimately realize from Fortuna, we have impaired the asset to a carrying value of $300 million held on our balance sheet at the period-end.”

Alan Booth, Interim CEO of Ophir, commented: “On Fortuna, we are continuing to work to deliver value for our shareholders whilst we are in possession of the licence. Reflecting the uncertainty surrounding this however, we have impaired the value of the asset to $300 million.”

Transition to Asian HQ

In a separate update on Thursday, Ophir announced the key next steps in company’s strategy, agreed between the board and Alan Booth, following his appointment as interim CEO in May 2018 and the recently closed Santos production acquisition.

Ophir said on Thursday it has an operating asset base capable of delivering free cash flow of $300 million over the next three years, a strong operating capability and potentially valuable gas assets in Equatorial Guinea and Tanzania.

In order to accelerate progress toward sustainability and shareholder returns, the board is taking several steps.

First of all, the company said it will continue to build a strong, cash generative production and development base to serve as the platform for further growth and shareholder returns. The recent asset acquisition from Santos was the first step in this direction, significantly increasing the company’s free cash generation.

Next, Ophir will be working to minimize its exposure to frontier exploration and focus on nearer field exploration opportunities that can drive production growth and/or extend field life.

Furthermore, the company will selectively evaluate opportunities for consolidation.

Also, Ophir will consider options to unlock the potential value in its LNG assets – value that is not today reflected in the share price despite a rapidly improving LNG landscape.

In addition, the company will take further action to right size the cost structure of the business. The company plans to downsize its London office, following workforce consultation, and within 12 months establish a fit for purpose Asian based HQ to serve as the hub for its ongoing business, generating material cost savings.

The company also said that, following the departure of its former CEO Nick Cooper and the appointment of Alan Booth as an interim CEO, the search for a new CEO is underway.

With Asia becoming the hub of its operations, it is likely that the new CEO will be based in the region.

“The board believes that these actions will create a focused, efficient business generating a significant amount of free cash flow and will provide a strong platform from which the new CEO will be able to grow the business, as well as consider other capital allocation options,” Ophir concluded.

Offshore Energy Today Staff