Market scepticism over Ophir Energy’s (OPHR) flagship Fortuna floating liquefied natural gas (FLNG) offshore Equatorial Guinea is reignited as a potential farm-out agreement with Schlumberger (SLB:NYSE) collapses.
Shares in Ophir slump 17.2% to 76.1p on the news, with the two parties unable to complete the deal on the terms announced in January (26 Jan). Broadly these would have seen Schlumberger take a 40% stake in return for 50% of Ophir’s past costs.
The company still hopes to get to Final Investment Decision on Fortuna this year and announces a reduction in the capex requirement from this point to first gas from $600 million to $450 million to $500 million. The breakeven oil price for the development has also been lowered to $40 per barrel.
First gas is now expected in 2020. In our assessment it will need to find another partner in short order if it is to convince the doubters this is achievable. To this end the company says it is still in active discussions with a number of other parties.
Unhelpfully, prices for liquefied natural gas in Asia are at a seven-year low as demand fails to keep pace with rising supply from new projects in Australia and the US.