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Orlen in Africa

17-05-2010  

PKN Orlen is considering buying drilling assets
 
Orlen is conducting talks with a company owning deposits in Tunesia. It is also taking a glance at BP assets in Canada. Petrolinvest and Kulczyk Oil Ventures are also looking for oil. Lotos Petrobaltic is drilling oil on a small scale. PKN Orlen’ s drilling strategy was announced a few years ago when Igor Chalupec was the company’s president. The announcements were loud, however, the effects have been more than modest so far. Today the company is managed by Jacek Krawiec  who is thinking of buying drilling assets again. The first attempt was made already last year, however, the plans fell through due to the economic crisis. Now the company is going to succeed and the first agreement is to be concluded this year. Recently the company has been taking a closer look at North Africa. It is considering the purchase of a company which not only has an oil search permit but which is already drilling oil. According to unofficial information obtained by “Puls Biznesu” it could be the Irish company Petroceltic, which is present in Tunisia, Algeria and Italy. Negotiations are in progress. Orlen’s representatives do not confirm the name of  the company. They admit, however, that advanced talks with a company present in North Africa are in progress. “This is not a local company, it is listed on the London Stock Exchange. The cost of the operation is significant – counted in hundreds of millions zlotys. The entire company or only part of it may be bought.” – says Wiesław Prugar, President of Orlen Upstream. According to unofficial information, the company manufactures 5-10 thousand barrels of oil (0.25-0.5 million tonnes). Petrobaltic from the Lotos Group drills a comparable quantity of oil. Africa is not everything, though. Financial problems of the BP Group after the oil well blow-out in the Gulf of Mexico has caused the Britons to be willing to sell some of their assets in North America in an attempt to make up for losses. “In this situation the price will certainly be very attractive. We are considering the possibility of Canadian purchases,” – says a person connected with PKN Orlen. Wiesław Prugar does not confirm these reports, he only admits that the company is interested in oil deposits in North America and in... the Middle East. Information that the company may be conducting talks about taking over the Dominion company acting in Central Africa has appeared on the market. Orlen, however, has a big problem – the money. It is unofficially known that there is only 100 million PLN for this purpose in the budget of Orlen Upstream. This is just a drop in a sea of needs. The Group counts on money from the sale of Anwil or shares in Polkomtel. The money is not everything, however. A lot depends on oil prices. ”Buying assets is different when a barrel of oil costs USD 40 and when it costs USD 140. When the prices were close to the latter value in 2008 it was very difficult to seriously consider investments in the drilling sector as the assessment of assets was inflated. At present oil prices have stabilized at the level of USD 70-80 per barrel and this price is favourable to investments. “Purchases of assets have become more likely, it is already visible on the market,” – says Wiesław Prugar. In his opinion, in a few years Orlen will own oil and natural gas assets in several regions of the world. “At present, 700 thousand tonnes of oil are drilled in Poland. We want to reach at least this level,” – declares Wiesław Prugar. Analysts are sceptical. “The money from the sale of asset would make it easier to Orlen to buy drilling assets. The problem, however, lies in the fact that the group has no experience in concluding such transactions. Successful purchases may also depend on the political support of the Polish government,” – says a well-known consultant on the market of oil and natural gas search and drilling. Others claim that there is a chance of a takeover but it is not realistic this year. ”If it is assets which already produce oil I think there would be no problems with finding debt funding for it. However, if such assets are to have measurable significance the company should buy a large entity or a permit with very good perspectives. And this costs a lot,” – explains Paweł Burzyński, an DM BZWBK analyst.
 
Puls Biznesu, page no.: 1, 2010-05-17, author: Paweł Janas


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