Petronas Says OGX Oil Field Deal Hinges on Debt Restructuring
Petroliam Nasional Bhd., Malaysia’s state oil company, said its purchase of share in a field owned by OGX (OGXP3) Petroleo e Gas Participacoes SA will hinge on the Brazilian oil producer’s debt restructuring plan.
The company, known as Petronas, has yet to complete the transaction after agreeing in May to pay $850 million for a 40 percent stake in two blocks of the Tubarao Martelo field off Brazil to Eike Batista’s OGX, Chief Executive Officer Shamsul Azhar Abbas said today. Petronas isn’t involved in OGX’s debt restructuring, he said.
“The deal is still pending full clarity with regard to the restructuring exercise,” Shamsul told reporters in Kuala Lumpur. “OGX hasn’t met the condition precedent. The debt restructuring has to happen first.”
Bondholders of OGX, which may run out of cash this month, hired Rothschild to advise on a debt restructuring, a person with direct knowledge of the matter said this month, asking not to be identified because the selection process is private. Batista is raising cash and selling pieces of his companies after his estimated fortune plummeted to less than $1 billion from $34.5 billion in March last year on missed production and profit targets, according to the Bloomberg Billionaires Index.
Petronas is in talks with a group of potential buyers for stakes in Canada’s Progress Energy Resources Corp., Shamsul said. One of the deals may be reached within a few weeks, he said. Petronas in March sold a 10 percent stake in its C$11 billion ($10.5 billion) liquefied natural gas project in Canada to Japan Petroleum Exploration Co.
Petronas today reported a 3.6 percent drop in second-quarter profit as lower crude prices countered an increase in output. Net income fell to 12.5 billion ringgit ($3.8 billion) in the three months through June from 13 billion ringgit a year earlier, according to a statement released in Kuala Lumpur. Revenue climbed 5.2 percent to 74.4 billion ringgit.
“Looking around there’s nothing to be excited about in the global economy,” Shamsul said. “There are strategies we have put in place to achieve targets and commitments.”
Brent slipped to an average $102.44 a barrel during the three-month period from $108.19 a year earlier, Petronas said in the statement. Total production rose to 2.08 million barrels a day of oil equivalent in the second quarter from 1.85 million last year, according to the company.
Petronas may scrap a $20 billion refining and petrochemicals project in Pengerang at Malaysia’s southern Johor state bordering Singapore, Shamsul said. The company is undertaking a strategic review on the costs and potential returns before making a final investment decision by the first quarter next year, he said.
Taiwan’s Kuokuang Petrochemical Technology Co. may scrap its plans to build an integrated refining and petrochemical complex in the same area due to unfavorable project economics, Platts reported Aug. 20, citing an unidentified official from Kuokuang shareholder CPC Corp. Kuokuang said it’s still waiting for results of an environmental impact assessment to decide.
“When the environment turns south, many companies will review their costs,” Shamsul said. “I’m more worried about the upstream costs, be it the jack-up platforms, be it the marine support services, those are creeping up. Anything with negative returns would be scrapped.”
To contact the reporter on this story: Chong Pooi Koon in Kuala Lumpur at email@example.com