UK oil explorer Ophir exit Lamu block on Sh6.4bn hit

Money Markets

An oil and gas exploration platform in the ocean. PHOTO | FILE 

By GEOFFREY IRUNGU, girungu@ke.nationmedia.com

In Summary

• Ophir Energy said Kenya was among the countries it was exiting or planning to exit as there were insufficient returns or accumulated losses.
• The firm did not reveal who the prospective buyer of its stake was, nor did it say at how much it is expecting from the block.
• Mid last year, the company said it was looking for a buyer of its stake at the block which it wholly owns.

London-listed Ophir Energy is exiting oil exploration investments at the Coast-based Block L9 after writing off a loss of Sh6.4 billion ($62.7 million) spent in searching for hydrocarbons.

In an announcement accompanying the release of its 2015 financial results, the oil exploration firm said Kenya was among the countries it was exiting or planning to exit as there were insufficient returns or accumulated losses.

Ophir made a loss of Sh38 billion in 2015 compared to a loss of Sh29 billion the previous year while its cash position shrank drastically to Sh36 billion from more than Sh119 billion in 2014.

The firm did not reveal who the prospective buyer of its stake was, nor did it say at how much it is expecting from the block. Mid last year, the company said it was looking for a buyer of its stake at the block which it wholly owns.

“The impairment loss of $62.6 million (was) in respect of Kenya - Block L9. The trigger for impairment was management’s assessment that no further expenditure on exploration and evaluation of hydrocarbons in the block was budgeted or planned within the current licence term,” the company said in the statement.

READ: Africa Oil to trim Kenya operations as global commodity prices decline

The loss or impairment in Kenya was the single largest comprising more than a third of the total — of Sh15.2 billion — that the company underwent in Africa.

“We are exiting our low-priority assets in order to focus our people and capital on maximising value creation from high-priority acreage. As a result, during 2015 we exited — or started the process of exiting — from Kenya, Seychelles and a number of blocks in Indonesia and Tanzania,” said the firm.

Sometime towards the end of last year, the share price of the company jumped more than 11 per cent following reports that it had received some informal takeover interest.

The plunging of global oil prices has taken a toll on the company whose stock had lost nearly 40 per cent — as at the end of last November — before the news of the takeover interest emerged.

Several exploration companies have sold or sought to sell their stakes in Kenya in view of the fall in the international prices of oil that have left them struggling with cash flows and running costs.

Others have been seeking cash to expand exploration activities despite the fall in the prices of hydrocarbons.

Ophir Energy has also spent hundreds of millions of shillings in buying stakes in exploration blocks in other countries.