Lagniappe

 

 

Global Insight : PetroFalcon to acquire
Anadarko's assets in Venezuela

Global Insight Perspective Latin America Energy Briefing

Anadarko Petroleum becomes the latest IOC to pull out of Venezuela.

Significance

PetroFalcon has agreed to pay US$200 million for Anadarko's assets in
Venezuela.

Implications

Although the operating environment in Venezuela is not the sole reason
for Anadarko's withdrawal, the sale signifies the exit of another North
American oil company from the Venezuelan oil sector following the
decisions of ExxonMobil and PetroCanada not to sign up to new contracts.

Outlook

PetroFalcon may have secured a good price because of the risks
associated with doing business in Venezuela, but it is also taking a
risk in increasing its exposure to Venezuela at a time of continued
regulatory uncertainty.

PetroFalcon Reaches Accord with Anadarko

Canada's PetroFalcon Corp. has announced the signing of a sale and
purchase agreement with Anadarko Petroleum for the acquisition of 100%
of the U.S. company's Venezuelan unit Anadarko Venezuela for US$200
million in cash. The sale is effective from 1 January 2008 subject to
the approval of the Venezuelan Ministry of Energy and Petroleum.

Anadarko Venezuela's main asset is the indirect ownership of an 18%
stake in Petroritupano, a mixed company with the Venezuelan state oil
company PDVSA and Brazil's Petrobras that operates the 340,000-acre
Oritupano-Leona Block in eastern Venezuela. Petroritupano's gross
production is 38,000 barrels per day (b/d) of oil with an average
16-degree API and 20 mmcf/d of natural gas, or 41,333 boe/d. Anadarko's
share of production before royalties is around 7,440 boe/d. Gross proved
and probable remaining reserves were around 199 million boe as of 1
January 2008, of which Anadarko's share accounts for around 35.8 million
boe before royalties. However, PetroFalcon is optimistic about the
block's potential for future discoveries, saying in a statement that it
estimates that there are six prospects with an unrisked reserve
potential of over 250 million boe, or 45 million boe net to Anadarko
Venezuela.

Anadarko Venezuela also has a US$58-million voucher that can be used as
credit with the Venezuelan government for new oil and gas investment
opportunities and which PetroFalcon said it intended to use "to compete
aggressively for new fields in Venezuela.

PetroFalcon Expanding Presence

The attractions of the Oritupano-Leona Block are clear. PetroFalcon said
that the transaction will significantly increase its "expected cash
flow, multiplying our daily oil production by almost eight times and
more than doubling our proved and probable reserves". However, the
acquisition will be seen by many as a brave move by PetroFalcon
especially as the fact that all of its existing upstream portfolio is in
Venezuela meant that it was particularly badly hit by the revenue losses
resulting from the implementation of new contracts in that country.

Nonetheless, Anadarko Venezuela is not the only new acquisition that
PetroFalcon is contemplating in Venezuela. Vinccler Oil and Gas, the
wholly owned subsidiary of PetroFalcon Corp., on 12 March announced the
signing of a farm-in agreement that will allow Vinccler to acquire a 25%
working interest in the natural gas licence for the offshore Cardon IV
Block in the Gulf of Venezuela. PetroFalcon is also in the process of
acquiring a 30% interest in the nearby Cardon III Block, operated by
Chevron Corp.

Sweden's Lundin Petroleum has a 40% stake in PetroFalcon and has agreed
to help finance the acquisition.

Outlook and Implications

Anadarko's exit from Venezuela has been on the cards for a long time.
Indeed, as long ago as December 2006, the company announced that it was
planning to sell its Venezuelan assets. The sale is part of a broader
strategy that has seen Anadarko divest its assets in several countries
around the world in order to pay back some of the debt acquired through
its purchases of Kerr-McGee Corp. and Western Gas Resources.

Nonetheless, its exit from Venezuela will no doubt be seen by many in
the context of increased regulatory uncertainty and government
interference for companies operating in Venezuela. The Chavez
government has replaced all the contracts signed during the apertura or
oil-opening phase of the 1990s with mixed companies in which PDVSA has a
controlling stake. The new contracts also include less favourable fiscal
terms and do not permit recourse to international arbitration in the
event of a contract dispute. Possible returns on investments by foreign
oil companies in Venezuela are due to be further reduced under a
proposed windfall profit tax that reduces profits after the price for
oil exports exceeds US$70 per barrel. In this context, it is perhaps
more surprising that PetroFalcon is looking to expand its presence in
Venezuela, rather than that Anadarko is hoping to leave.

 

 

Juliette Kerr is a Global Insight's Latin America Energy Analyst (juliette.kerr@globalinsight.com). Petroleumworld does not necessarily share these views

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Petroleumworld News 04/09/08

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