Ophir Energy’s Tanzanian Block 7 tipped for disposal – industry sources

02 Sep 2014 – Ophir Energy [LON:OPHR], the Africa focused oil and gas exploration firm, could consider divest its Block 7 asset in Tanzania to free up capital and streamline its portfolio, a sector banker and a sector lawyer suggested.

The firm recently announced cost cutting measures. In late August, it said it would reduce the number of executive directors on its board and cut one non-executive role, as well as making other cuts across all levels of the company. Earlier in August Ophir announced a USD 100m share buyback to appease investors disappointed with poor drilling results. 

The firm holds assets in offshore Senegal, Guinea Bissau, Equatorial Guinea, Gabon, Kenya, Saharawi Arab Democratic Republic (SADR), the Seychelles, Somaliland and Tanzania. None of these are producing. 

“Ophir Block 7 in Tanzania is a possible target for disposal. Ophir has got its hands full with its other drilling programmes,” the lawyer said. 

Ophir holds five blocks offshore Tanzania. It operates two blocks: Block 7, in which it has an 80% interest, and a 70% interest in East Pande. It also holds 20% interests in Blocks 1, 3 and 4, which are operated by BG Group. In January, Ophir announced that Mlinzi Mbali-1, the first well it drilled in Block 7, was dry. At the time the company called the well “high impact, high risk” in a statement. The block is not being drilled at present.

This year, Ophir had an unsuccessful drilling campaign in Gabon and reported disappointing results from drilling its Tonel North-1 well in Equatorial Guinea. 

In March, it completed the sale of a 20% stake in Tanzanian Blocks 1, 3, and 4 for USD 1.25bn to Pavillion Energy, with an additional milestone payment of USD 38m should a final investment decision be made. For this deal, Ophir’s financial advisers were Evercore Partners and JP Morgan Cazenove; its legal adviser was Linklaters. 

Ophir’s market cap stands at GBP 1.4bn. Its share price is GBP 2.37, down from GBP 6.41 in September 2012.

The firm has also long been tipped as a takeover target. 

“There is pressure on Ophir and it will increase. The company does not have a portfolio of producing assets and it has an expensive drilling programme,” the banker said. “Someone at some point must do something with Ophir. People are looking at it as a possible target.”

Ophir declined to comment.

by Katie McQue