Swiss billionaire Jean-Claude Gandur poses next to 'Sarah,' a painting by Jean Fautrier, one of his collection of masterpieces on display in late 2011 at the Fabre museum, Montpellier. (Image credit: AFP/Getty Images via @daylife)
After five years, Jean Claude Gandur is back in the game. The Swiss billionaire made the bulk of his $2.1 billion fortune (as of Forbes’ last count) selling publicly traded Addax Petroleum to Sinopec in 2008 for $7.2 billion. And this week he finally returned to the public markets, bringing in $250 million through the initial public offering of 17% of the company’s shares on the Toronto Stock Exchange. Debuting at C$15, shares in OXC currently trade at $14.50.
Like Addax was before it, Oryx is named after a noble African relative of the antelope with grand horns. Like Addax, Oryx will be focused on exploring for oil in west Africa and Iraqi Kurdistan. And little has changed from the Addax days as it concerns Gandur’s legendary gift of forging political and business connections in complicated parts of the world. The son of a Swiss pediatrician, Gandur, 64, grew up in Alexandria, Egypt, became and oil trader in the 1970s and by the 1990s had made such keeconnections in west Africa that he had been dubbed Commander of the National Order in Benin, has a diplomatic passport from Senegal, and for a decade was honorary consul in Geneva for Republic of Congo. He still is deeply invested in Africa, operating a fuel distribution network under the Oryx brand (but unaffiliated with the newly public company) as well as Addax Bioenergy, a biofuels operation in Sierra Leone.
(For more on Gandur’s history check out this profile I wrote back in 2007.)
But whether Gandur can orchestrate a repeat of Addax’s great success is yet to be seen. When Addax was sold to Sinopec it was generating roughly $300 million a year in net income on sales of 140,000 barrels of oil per day. Oryx, on the other hand, has no revenues at all. Yet Gandur is so confident about its opportunities that he has, through his majority controlled holding company AOG, injected $700 million into Oryx to acquire prospects and start drilling wells. No oil and gas is flowing yet, but if all goes well in Iraq, Oryx states in itsprospectus that it could be handling as much as 300,000 bpd of oil within five years.
The key asset behind Oryx now is the Demir Dagh field in the Hawler block of the Kurdish region of Iraq. A discovery well was initially drilled there back in 1960, then another in 1990. Oryx last year invested roughly $50 million to drill its first hole in Demir Dagh. As a result they figure the field contains about 500 million barrels in several geologic intervals. According to an analyst by Tudor, Pickering & Holt, the Demir Dagh field might be so big that it connects to another field to the west called Banan. Oryx expects to learn more when it drills Banan this year. (See and excellent map of all the Kurdish oil and gas concessions here.) In an optimistic scenario laid out in the Oryx prospectus, Demir Dagh has the potential to give up 215,000 bpd of oil by 2017, with the entire Hawler block (65% Oryx interest) producing more than 300,000 bpd by 2018.
This is obviously big time oil. In its prospectus, Oryx figures that developing Demir Dagh will cost around $1.1 billion, including some $200 million for an 80-mile pipeline and $200 million for processing. The average well there will cost $11.5 million, with operating expenses of about $11 a barrel and transportation costs of $10 per bbl for trucking and $5 a barrel for pipeline later.
In the middle of the Hawler concession lies Erbil, the Kurdish capital. Hawler is surrounded by concessions operated by the likes of ExxonMobil, Afren, DNO and Chevron CVX +0.18% Hess HES +0.18%, Hunt Oil and Marathon Oil MRO -0.17% are nearby. Political risk remains high here, with Baghdad still arguing with the Kurdish Regional Government over the legality of its many deals. Pipeline capacity is insufficient, and when oil is exported the companies often have a hard time getting paid.
Growing pains are to be expected. But the truth is that the Kurds have figured out a model that works. Oil giants like Exxon and Statoil have turned their backs on money-losing deals with Baghdad to rehab megafields in the south because the service contracts didn’t allow them to book reserves, or pay enough to be worth the trouble. In contrast, the production sharing contracts offered by the Kurds do allow the booking of reserves and no cap on profit potential.
It’s in Oryx’s favor that Gandur has a very good relationship with the Kurdish authorities. In 2005 he became one of the earliest western investors to take a chance on the Kurdish oilpatch, partnering with Turkish oil company Genel to develop the supergiant Taq Taq field. Since those early years the Kurdish economy has blossomed, with construction booming all over the region as billions of dollars flow in to fund drilling activities.
It was emblematic of the regional government’s trust in Gandur that a couple years ago they asked Gandur to do them a favor. Norbest, an affiliate of Alpha Access Renova, which is controlled by Russian oligarchs Victor Vekselberg, Mikhail Fridman and Leonard Blavatnik, had acquired stakes in the Hawler and Sindi Amedi blocks in 2007. The oligarchs had initially expected to develop those assets through Russian oil giant TNK-BP, in which they held a 50% stake (recently sold to Rosneft). But BP had objected to the company venturing out of Russia and onto turf that BP thought should be its own. So the oligarchs had to back off their Iraq plans. This meant the blocks were just sitting there, not getting drilled or developed. Gandur, through AOG, is thought to have paid in the neighborhood of $200 million to take Norbest out of its Kurdish prospects.
(Image credit: AFP/Getty Images via @daylife)
This was, in effect, the cornerstone transaction that has led to the new Oryx Petroleum.
Hawler alone is enough of a world-class asset to keep a small company like Oryx busy. But in Iraq the company also hopes to explore outside of the Kurdish region, in an area called Wasit, southeast of Baghdad and right next to the border with Iran. It’s prospectus states that after seismic testing this year it hopes to drill an initial well in Wasit in 2014. The keen observers at Iraq Oil Reportdoubt that Oryx has much chance of prevailing in Wasit. Oryx admits in its prospectus that unlike the Kurdish region, Wasit is not “semi-autonomous” and does not have a successful history of awarding oil contracts — so the concession is more likely to be challenged by Baghdad. Oryx’s partner in the Wasit prospects is KPA Western Desert Energy, which appears to be a subsidiary of an investment company calledKepis & Pobe, which counts among its directors former execs of Canadian oil company Suncor as well as retired U.S. Army General Wesley Clark. KPA’s Iraq connection appears to be Amira Industries, operated by Lawrence and Arman Kayablian. Amira, on its website, says it is an industrial conglomerate founded in Iraq in the 1960s with a history of manufacturing heating and air conditioning units. Despite the odds, perhaps these guys are well enough connected to make the Wasit plan work.
Oryx has also indicated that it intends to drill at least three wells in west Africa this year, mostly in Congo-Brazzaville.
So what’s Oryx worth? At C$14.50 a share across 98.5 million shares outstanding, its implied market cap is $1.4 billion. Back out the roughly $250 million in cash left from Gandur’s capital injection plus the $250 million in IPO cash, and the market figures Oryx’s assets are worth about $900 million on a standalone basis. Gandur, through AOG, controls 77% of the company. He directly owns roughly 75% of AOG.
Gandur needn’t be in a hurry. With that $500 million in cash, Oryx has enough to drill wells for a couple years and to fund infrastructure developments. If all goes well it can sell more stock or take on debt to continue funding. But the payoff for investors and for Gandur, however, will be in selling part or all of the company to one of the other deep-pocketed players in northern Iraq. With Exxon, Chevron, Total and others all in the neighborhood, there will be no shortage of potential buyers watching to see what Gandur and his crew can build.
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