Petrolifera aims to pull out of Argentine market

Mar 02, 2009 01:00 AM

Calgary's Petrolifera has decided to sell its E&P assets in Argentina to focus on exploration in Colombia and Peru, the company said.
The company has engaged Canadian investment bank Tristone Capital to set up data rooms that will be made available to qualifying companies, company CEO Richard Gusella told. The rooms should be opened soon and most likely will be in Calgary, Houston and Buenos Aires, Gusella said.

All of Petrolifera's production comes from Argentina, where it produced 7,744 boepd in the third quarter last year. Besides shifting its focus to Colombia and Peru, the company would use the proceeds from any sale to discharge related outstanding long-term indebtedness.
The company's decision to pull out of the country was not based on politics, Gusella said, adding that the decision reflects the relative maturity of the Argentine assets, a desire for more liquidity and the prospect of better returns in Colombia and Peru given the nature of the assets there.

Gusella acknowledged the risks involved in giving up significant production assets to become an exploration company but said that the potential in Colombia and Peru justified the decision.
"We need to act on our principles and understanding of capital allocation objectives," he said. "Having no debt and money in the bank with the type of upside we see in Colombia and Peru is not the worst situation one could envisage." The company's current exploration program in Argentina will continue within limits as the sale proceeds, and new drilling will be announced soon, according to the CEO.

The announcement, meanwhile, comes as the company saw significant declines in reserves during 2008. Petrolifera's 1P crude oil and natural gas liquids reserves decreased 25 % to 11.3 mm bbl as at December 31, 2008 compared to 15.1 mm bbl at December 31, 2007 because of complications with the efficiency of the company's water flood at Puesto Morales Norte in Argentina's Neuquén basin.
The company's 1P natural gas reserves also declined by 36 % to 10 bn cf (283 mm cm) after record production in 2008 of 1.9 bn cf and the impact of technical revisions offset by exploration discoveries.

Gusella said that reserve replacement in Argentina could be improved.
"Our reserve replacement was primarily affected by technical revisions," he said. "If we sort out the increased water cut from channelling or water moving through highly permeable conglomerates, primarily in the northern part of the field, then we could recover the technical revisions."
"We hope that a buyer will do well and will pay fair value for the opportunity," Gusella continued. "We see quite a bit of interest already."

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