BP Plc’s decision to buy all of Energean Oil & Gas SA’s Aegean Sea production will help Greece’s only oil producer attract international loans to spur investment, Chief Executive Officer Mathios Rigas said.
"The deal with BP is a huge step toward putting Greek crude on the world oil map,” Rigas said in an interview in Athens. "With BP doing the marketing, crude oil from the Prinos field will get recognized by, and access to, international markets and that will enable us to approach international banks for financing.”
Energean on Jan. 13 signed a six-year deal with BP Oil International valued at $500 million based on projected oil production at current prices. The Greek government the same day agreed to eliminate a requirement that Energean sell output to local refiner Hellenic Petroleum SA.
Energean plans to invest 150 million euros ($203 million) in 2014 and 2015, in part to tap the Epsilon satellite field and lift daily production at Prinos, with the aim of increasing total production in the Kavala Gulf to 5,000 barrels by the end of the year from 2,500 today. Proven recoverable reserves, including current production, stand at 24 million barrels, meaning the Prinos field still has 15 years of production left, Rigas said.
Energean was forced to use its cash to pay back loans over the last three years rather than investing, Rigas said, as Greek banks pressed companies to repay debt as they tried to shore up capital. Energean canceled an initial public offering in London in 2011 due to concerns of "being hit by an association with Greece even though we’re not connected to the Greek economy,” he said.
Third Point
Greece in 2013 suffered a sixth year of recession that has destroyed about a quarter of its economic output and sent the unemployment rate to more than 27 percent, the highest in the euro area. Since early 2010, Greece has received two international rescues totaling 240 billion euros in return for pledges to bring public spending under control.
US-based hedge fund firm Third Point LLC invested $60 million in the company in May of last year and now owns a "strategic” stake, Rigas said. Energean is in continuous need of equity capital because of its rapid growth, Rigas said. While Energean doesn’t need an IPO, it would still consider selling shares under the right conditions, he said.
"There’s a lot of investor interest in Greece at the moment, especially from funds looking for returns of at least 30 percent,” Rigas said. "That means buying into companies that sell goods or services abroad.”
Egypt Licenses
Energean has two concession licenses in Egypt and is targeting presence in a third country in 2014, the executive said. The company will bid for oil exploration and drilling rights in Montenegro in a bidding round scheduled for May and is evaluating prospects in Albania, Croatia, Romania, Lebanon, Israel, Tunisia, Kenya and Tanzania.
Energean also wants to bid for rights to explore in new concessions in Greece’s western offshore areas and south of the island of Crete, Rigas said. The company is setting up a joint venture with deep-water drilling specialist Ocean Rig for tenders in Greece and abroad.
Greece in July selected a venture of Energean and Petra Petroleum as a preferred bidder for a concession to explore in an inland area close to Ioannina with final contracts expected by the end of February. Energean also made an improved bid for a license to explore in Katakolo, off the country’s west coast, which has as much as 5 million barrels of recoverable oil, Rigas said.
Katakolo is the only Greek field that could come into production over the
next 18 to 24 months as it has proven reserves, he said. "It’s important for
the Greek government in the next invitation to bid for exploration licenses to
show that production is already taking place in the region,” Rigas said.
(by Paul Tugwell, Bloomberg, Jan. 21, 2014)
