Business Irish

Monday 25 June 2018

Petroceltic pushes ahead with developing flagship project

Petroceltic chief executive Brian O’Cathain
Petroceltic chief executive Brian O’Cathain

Paul O'Donoghue

Irish oil and gas explorer Petroceltic is moving ahead with the development of its flagship project in Algeria after announcing yesterday that it has shortlisted four potential contractors for the project.

The companies have been invited to tender for the provision of engineering, procurement and construction (EPC) services.

The four companies shortlisted are Daewoo Engineering & Construction, GS Engineering Corporation and Dodsal Engineering & Construction, JGC Corporation and JGC Algeria Spa and Tecnidas Reunidas SA and Bonatti. Petroceltic expects to complete the tender process by the end of the year and is anticipating first gas from Ain Tsila by 2018.

Development drilling is due to commence in the last quarter of this year with up to 24 new wells planned.

Chief executive Brian O'Cathain said: "We are delighted to see the continued solid progress of the Ain Tsila project towards the EPC contract award, and onwards towards first gas in 2018.

"The anticipated award of the EPC to an EPC contractor with significant Algeria experience will be a major milestone in de-risking that schedule"

The Irish firm is leading development on the project in Algeria, in which it holds a 38pc stake, alongside state-controlled Sonatrach which owns 43pc and Enel of Italy which has 18pc.

It is overseeing the estimated $2bn expenditure on the scheme, the cost of which is to be split between the three partners. The project represents a large proportion of Petroceltic's current market value.

Davy Stockbrokers valued Petroceltic at 189 pence per share, with Ain Tsila making up 111 pence per share of this.

The project has recently been a focus of ire for activist shareholder Worldview. The Swiss fund, which holds a 29pc stake in the exploration firm, has condemned a proposed $175m bond issue to be secured against the value of the Ain Tsila asset.

Petroceltic, who announced the bond issue at the end of June, then put it on hold at the start of August, citing market volatility.

Worldview has forced an emergency general meeting that is set to take place in early September.

The fund has put forward a motion that, if passed, would mean that Petroceltic would not be able to dispose of assets representing 25pc or more of the its revenues, profits or reserves without it first being cleared by shareholders.

It has also vowed to try and block the bond issue, claiming that Petroceltic is putting its prized asset at risk.

However, the Dublin-based firm has indicated that the EGM resolutions will not have any impact on the bond issue.

There is a resolution to be put to shareholders that would put a cap on borrowing, however the resolution would still leave the firm with a limit of $659m based on its current cash available, which is above the company's current plans.

Petroceltic has also indicated that it will proceed with the $175m raise in September provided that it views market conditions as being suitable.

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