Angolan state Sonangol has called off its planned $1.75bn purchase from US producer Cobalt International of the latter’s 40% operating interest in blocks 21/09 and 20/11.
At its 2Q results August 2, Cobalt said its CEO Tim Cutt – who was appointed just a month ago – met with Sonangol chairwoman Isabel dos Santos and her team in late July to discuss the status of the sale. She was appointed by her father, Angola’s president, in early June 2016.
Cobalt’s statement read: “At this meeting, Cobalt and Sonangol jointly agreed that Cobalt would market Cobalt’s 40% working interest in Blocks 20 and 21 to sell the assets to a third party. On August 1, Cobalt received a letter from Chairwoman Isabel dos Santos confirming Sonangol’s support of such marketing and sale process. Given this agreement to market Cobalt’s interest in Blocks 20 and 21, it is unlikely that the sale transaction between Cobalt and Sonangol will close pursuant to the terms of the August 2015 Purchase and Sale Agreement, and therefore it is likely the Purchase and Sale Agreement will automatically terminate on August 22, 2016. Cobalt is currently preparing a data room for its Angola assets and will immediately commence the marketing and sale process.”
Cutt added August 2: “Although we would prefer the transaction with Sonangol to close, I am pleased that we can remarket these attractive liquid rich assets to third parties. The development cost environment has improved substantially, the fundamentals for medium to long term liquids pricing remains strong and we have delivered two new discoveries on Block 20.”
It was not immediately clear if Cobalt would be due a termination fee from Sonangol.
In a preface to its annual report, just published, Sonangol CEO Francisco de Lemos Jose Maria said that 2016 would be a “difficult” year for the state company.
Cobalt said in its 2Q 2016 it had received $250mn of Angolan sale proceeds. However it has also expended money during that time on continued drilling operations on the blocks, on the understanding that these would be refunded by the buyer upon completion. During this period, Sonangol declared a 2.8 trillion ft³ gas discovery on block 20/11 as commercial.
Cobalt announced a net 2Q 2016 loss from continuing operations of $200.4mn, less than its comparable loss of $53.4mn in the same quarter of 2015.
Article by Mark Smedley, Natural Gas Europe