Longboat Energy plc is shifting its focus to Southeast Asia in a “strategic pivot”.
The move follows the sale of its 50.1% holding in Longboat JAPEX Norge AS (LJN). After a detailed review of its areas of geographic operation, Longboat’s board and management have decided to exit Norway and to focus on building a full-cycle exploration and production (E&P) business in Southeast Asia, where it sees significantly more potential for a small company than Norway. The company said in a news release that its existing positioning and access to opportunities provide excellent value-creation potential.
“Recent structural changes to the Norwegian upstream industry have favored an increasingly small group of very large companies with long-term investment horizons and access to low cost of capital,” Longboat said. The changes have left the company “at a significant competitive disadvantage,” it said, adding that it has not been able to establish a meaningful growth platform in Norway.
Meanwhile, Longboat’s entry into Malaysia last year “coincided with a proliferation of opportunities across Southeast Asia and a positive and supportive attitude of the host governments towards small- and medium-sized companies, which are now viewed as crucial to maximizing value from their maturing basins,” it outlined.
“Further, this positive industry sentiment is set against a macro backdrop of growing economies with increasing energy demands, benign operating environments, a structurally lower cost base and an opportunity to help reduce carbon emissions through the development of indigenous gas resources to displace coal-fired power generation,” it continued.
Longboat maintained that it has competitive advantages in the region, including an experienced team with excellent long-term relationships and networks established across Southeast Asia. In addition, “its growing portfolio already includes sought-after acreage and operatorship in one of the most exciting basins in the region, as well as visibility on accessing many additional opportunities to diversify and grow materially its asset position,” the company added.
Longboat noted significant industry interest in Malaysian Block 2A, where it is the operator with a 52.5 percent stake. The block, located offshore Sarawak in eastern Malaysia, contains the giant Kertang prospect.
The company added that it has provisionally been granted an award, subject to the successful negotiation of certain key contractual terms, for acreage in shallow water offshore Sarawak containing several material, undeveloped gas fields capable of near-term development.
Longboat said in a separate statement that the decision follows the continuing scarcity of acquisition opportunities suitable for Longboat, the disappointing performance of the Statfjord Satellites, and slow progress on monetizing the Kveikje discovery, “all of which have contributed to a near-term projected working capital shortfall in LJN which could result in Longboat forfeiting some-or-all of its shares in LJN”.
Nick Ingrassia, CEO of Longboat, said, “In Southeast Asia we are finding cooperative and welcoming governments plus a supportive regulatory environment which in combination is creating lots of interesting opportunities. The reshaped board and management team have been active in the region for many years and, importantly, we understand what is expected of us by our hosts”.
“We have a small but exciting initial portfolio and now have the chance to showcase what independents do best; find, develop, produce and bring hydrocarbons to market for the benefit of all stakeholders,” he continued.
“It was a tough decision for the board and management to exit Norway, but Western Europe is proving to be an increasingly difficult region to thrive for independent E&P companies,” he concluded.
To contact the author, email rocky.teodoro@rigzone.com
Generated by readers, the comments included herein do not reflect the views and opinions of Rigzone. All comments are subject to editorial review. Off-topic, inappropriate or insulting comments will be removed.
