Ophir Energy announced that it has finalized commercial terms and is in the process of signing heads of agreement (HoAs) for LNG offtake from the Fortuna FLNG Project with a shortlisted group of counterparties, all of which are globally established LNG Buyers.
The offtake contracts offer flexibility to competitively deliver the gas into either the Atlantic or Pacific Basin and have been met with strong interest from LNG buyers.
The total requested demand under the HoA’s has substantially exceeded the available offtake from the project.
Each of the LNG buyers has completed due diligence on the Fortuna FLNG Project prior to agreeing terms. Ophir expects that all of the HoAs will have been signed by the end of November. There will then follow a further shortlisting process to select one or two of these LNG Buyers with whom to sign full sales and purchase agreements (SPAs) in Q1 2016.
This timing is in line with the planned project final investment decision (FID) in mid-2016. Following further technical work on the gas reservoirs in the Fortuna field complex, ERC Equipoise (ERCE), an independent evaluator of oil and gas reserves, has increased its estimate of the gross contingent resource on Block R from 2.6 Tcf to 3.0 Tcf. An additional 0.8 Tcf of low risk gross prospective resource (0.7 Tcf risked) is also available and included in the base case planning for Fortuna FLNG.
In addition to these certified resources, management includes a further 0.3 Tcf of contingent resources in the base case that is associated with the implementation of compression later in field life. The approved development scheme will be further certified by ERCE at FID, which will be the point that resources convert to reserves and that reserves are booked for the Fortuna FLNG development.
Ophir is in parallel progressing its funding arrangements for the Fortuna FLNG Project. It is expected that the funding options for the project will include project equity, debt, pre-sales of gas, vendor financing and asset divestment.
The appropriate balance both equity and debt funding will be sourced to maximize the project’s returns for Ophir’s shareholders. Ophir’s production for the year to 9th November 2015 has averaged 13,400 boe/d (on a proforma basis).
Full year 2015 Group production is expected to be above previous guidance at ca. 12,700 boe/d on a proforma basis. Group revenue and operating cashflow from production for the full year are in line with previous forecasts.
Capital expenditure in 2015 is expected to be towards the lower end of the range at around US$250 million. Group cash at year end is forecast to be approximately $650 million with a net cash position of approximately $350 million.
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