Writing on the wall?EAGLEWOOD Energy, the smallest player in Papua New Guinea’s growing hydrocarbon hub in Western province, is a logical takeover target, says chief executive officer Brad Hurtubise.
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Eaglewood's licence map.
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Image courtesy of Eaglewood Energy.
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The Toronto-listed explorer’s shares have fallen 26% from their year-to-date high of C61c on October 24 to 45c on Wednesday. This trend was accompanied by some rumours that Eaglewood was aiming to sell its PNG licence assets and exit the country.
Hurtubise believes the motives behind these rumours also relate to Horizon Oil, which is advancing separate condensate recovery projects in petroleum retention licence 4 (Stanley field) and in PRL21 (Elevala and Ketu fields) in this region with Talisman Energy.
“Horizon Oil has publically announced that it is looking at divesting some or all of its PNG assets,” Hurtubise said.
“They are our neighbours in PRL4, and PRL21 and partners in petroleum prospecting licence 259 [Eaglewood 65%]. Perhaps someone is looking at taking out both Horizon and Eaglewood to dominate the area.”
He said Eaglewood operates half of the four key licences in the northern forelands, being PPL259 and PRL28, while Horizon operates PRL 4 for Talisman and operates the last one of PRL 21 in its own right.
“We have the only pipeline and facilities application for the area currently under consideration, and we are involved in unitisation discussions with PRL 4 which need to be resolved prior to the Stanley field being developed.
“We therefore have a great deal of strategic leverage in the area notwithstanding we are the smallest player involved. That, along with cash in the bank, makes us a logical take-over target and that is likely the source of the rumours.”
However, the explorer is open to making deals.
“Eaglewood’s board has a responsibility to maximise value and provide liquidity opportunities for shareholders so if a monetisation option was presented, the management and the board of Eaglewood would review and assess it on its merits,” the CEO said.
Eaglewood might consider selling a slice of PPL 259 at a price which reflects the success of the nearby Elevala-2 and Ketu-2 wells this year.
“With the outstanding results of the appraisal wells drilled recently in the PRLs surrounding our PPL 259, the value of PPL 259 has increased dramatically,” Hurtubise said.
He said the immediate work program was funded with its cash and a drilling carry from the 25% farmout to Horizon earlier this year.
“However at 65% there is room for a further farm down of an additional 10 or 15% should an attractive opportunity be presented and we needed the funding for an expanded program.”
The CEO also outlined Eaglewood’s strategy in PNG which included a desire to control its destiny by keeping high working interests, and operating its licences and controlling facilities if possible.
“We have no intention of coat-tailing along on some other operator’s agenda, so would not put ourselves in a position where we have only minority stakes in several licences,” Hurtubise said.
But he also discussed the other goal to “live within our financial and operational means and monetise our assets as quickly as we can.”
“If someone bigger can do it quicker, then we are open minded to discussing a hand-off,” Hurtubise said.
Eaglewood wholly owns PPLs 257 and 258, a 65% stake of PPL259 and a majority 40% stake of PRL28 (Talisman 30%).
Eaglewood struck a memorandum of understanding in October with Switzerland-based commodity trader Trafigura over financing the development of a condensate production facility and associated pipeline for the Ubuntu discovery in PRL 28.
Eaglewood has previously revealed that the PNG government will not award a PDL for PRL4, which hosts the Horizon and Talisman’s $US300 million Stanley condensate recovery project, until unitisation arrangements are made with Eaglewood as part of the Stanley field encroaches into PPL259.
Horizon has previously flagged that this PDL will be awarded before year-end.