Ophir Drops to Record Low After Schlumberger Exits Fortuna LNG

  • Talks terminated on preliminary deal agreed in January
  • Ophir says capex estimate to first gas cut to $450 million

Ophir Energy Plc fell to a record low in London trading after Schlumberger Ltd. pulled out of a preliminary deal to buy a stake in the Fortuna liquefied natural gas project off Equatorial Guinea.

“Ophir and Schlumberger have been unable to complete the transaction on the terms agreed,” the company said Friday. “As such, discussions between the parties have terminated.”

Shares of the U.K. company fell as much as 24 percent to 69.90 pence, the lowest since it was listed in 2011, and were trading at 74.90 pence at 10:44 a.m. in London. It was the worst performer on the FTSE 350 Oil & Gas Producers Index.

Under January’s agreement Schlumberger would have reimbursed 50 percent of Ophir’s past costs in exchange for a 40 percent interest in the floating LNG project. The withdrawal of the U.S. oil-services giant casts doubt over the viability of the project at a time low prices have created a tough investment climate.

“Ophir’s costs to first gas looked fully funded” by the Schlumberger deal,” Andrew Whittock, a London-based analyst at Liberum Capital Ltd., said in a note.“This raises questions about how Ophir will finance the project.”

The company is now evaluating other funding proposals, Chief Executive Officer Nick Cooper said in the statement. "We continue to work closely with Golar, the prospective offtakers and the other potential partners and remain confident” we will make a final investment decision this year, he said.

A final investment decision, due mid-year, will now be delayed until the fourth quarter, with first gas expected in 2020, the company said.

The capital investment requirement to first gas has been reduced to as low as $450 million from $600 million, Ophir said Friday.

“While the capex reduction is good news, the withdrawal of Schlumberger hurts the credibility of the project,” FirstEnergy Capital analysts said in a note to clients.

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