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Conoco Algerian Arm to Raise $1.75B
COP E APC
U.S. energy giant
ConocoPhillips ( COP - Analyst Report) has agreed to divest its Algerian business unit for about $1.75 billion to Indonesia’s state owned oil company – PT Pertamina. The intended sale forms part of ConocoPhillips’ 2012-2013 asset distribution program.
ConocoPhillips’ wholly owned subsidiary – ConocoPhillips Algeria Ltd. – has stakes in the Berkhine basin trio – Menzel Lejmat North (65% operatorship stake), Ourhoud (3.7%) and EMK (16.9%), which lie either fully or partially in Block 405a.
Other partners of ConocoPhillips in the fields comprise Talisman Energy Inc. , Anadarko Petroleum Corp. ( APC - Analyst Report) , Eni SpA ( E - Analyst Report) and Sonatrach Petroleum Corp., Algeria’s state-owned oil company.
The average yield from the fields for the year through October was 11,000 barrels of oil equivalent per day. Prior to the proposed sale, ConocoPhillips had placed a book value of about $850 million on its Algerian assets. The company anticipates the transaction to close by mid-2013.
The Houston-based explorer is shedding those assets it considers as least productive and has raised over $2 billion through the sale of refineries, pipelines and other assets since 2010. ConocoPhillips has announced further asset sales, together with the latest transaction, which are expected to raise funds of about $7 billion upon completion. These funds are expected to be used for general corporate purposes.
ConocoPhillips’ divestment of its Algerian unit will be value accretive for its shareholders as well as raise funds for concentrating on higher return assets. It will facilitate the company to focus on capital investments that will benefit production and cash margins and enhance returns on capital.
The proposed sale is subject to co-venturer pre-emption rights and Algerian government approval, over and above the customary adjustments and closing conditions.
ConocoPhillips holds a Zacks #3 Rank that is equivalent to a Hold rating for a period of one to three months. Longer term, we maintain our Neutral recommendation.