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U.S-based oil and gas exploration firm, ERHC Energy, it has retained the services of Deloitte Corporate Finance (DCF) to advise on the company’s oil assets in Kenya and Chad for possible joint ventures amid drop in global oil prices.
One deal on the table apparently is a $5m joint venture with Mercom Oil a London listed investment company with assets in Chad.
The deal rumoured to be a 50/50 split in a new venture sold by Chevron a 25 percent non-operated interest in a producing oil concession in southern Chad and the related export pipeline interests to the Republic of Chad for approximately $5 million.
“This sale demonstrates our focus on strategically managing our portfolio to maximize the value of our global upstream businesses,” said George Kirkland, vice chairman of Chevron Corporation.
“These assets have played a significant role for Chevron in Africa for the past 14 years,” said Ali Moshiri, president of Chevron Africa and Latin America Exploration and Production Company. “They have been a profitable part of our portfolio for many years. The combination of current market conditions and the size of the assets relative to our portfolio make this an ideal time for a divestiture.”
The transaction includes the sale of the Chevron subsidiary’s interests in seven fields in Chad’s Doba Basin, which in 2013 had an average net daily crude oil production of about 18,000 barrels. The sale also includes the Chevron subsidiary’s approximate 21 percent non-operated interest in a pipeline system that transports crude oil to the coast of Cameroon as well as associated marine facilities.
The firm’s CEO Peter Ntephe said in a statement that the drop in global oil prices has prompted consolidation among oil exploration companies. It said DCF will advise ERHC on matters related to possible joint ventures, alliances sales and divestitures on the Kenya and Chad licenses.
“These are challenging times for all oil exploration companies and we are leveraging DCF’s depth of skills and experience to support us in making decisions based on information that is constantly evolving,” Ntephe said in the statement received in Nairobi.
ERHC currently holds a 100 percent interest in Block BDS-2008 in Southern Chad and a carried 35 percent interest in Block 11A in Northwestern Kenya.
Recent discoveries of oil and gas across the East Africa region have positioned the region as a lucrative investment destination in Africa for foreign investors who have been scouting for opportunities. Some five upstream oil and gas companies are ramping up activity in Kenya, as the country becomes a focal exploration point in a dash for the commodities.
Research has shown that discoveries in the last few years are more than that of any other region in the world, and the boom is expected to continue for the next five years.
This impressive position is, however, becoming less significant as global oil prices continue to fall. Experts said further decline threatens the region’s economic prospects.
“We anticipate DCF’s involvement will be valuable as we pursue strategic options through access to their global network of corporate finance professionals around the world,” Ntephe said.
Beyond its assets in Chad and Kenya, ERHC also is seeking new strategic investment into the company itself.
“The current valuation of ERHC presents an exceptional opportunity for equity investors to gain access to ERHC’s rich portfolio of licenses,” Ntephe said.
