Canadian oil company Pacific Exploration & Production Corp. is selling its 35% stake in the Karoon Blocks in Brazil to Karoon Gas Australia Ltd. for $15.5 million USD plus the potential for a future payment based on oil production at the field. This subsequent payment, which will come on commercial production that hits one million barrels of oil, will pay Pacific Exploration another $5 million USD.
The pending sale, which also includes Karoon subsidiary Karoon Petróleo & Gas Ltda in Brazil, will require regulatory approval by Brazil’s Agência Nacional do Petróleo, Gás Natural e Biocombustíveis and the Superior Court of Justice in Ontario. Neither is expected to hold up the transaction.
“We are pleased to announce this sale, which will improve our cash position, decrease our exploratory commitments, and provide additional flexibility,” said Dennis Mills, chair of the independent committee of Pacific Exploration’s board of directors. “This transaction is aligned with the long-term interests of the company, which is to improve liquidity and best positions the company to navigate the current oil price environment.”
Pacific Exploration has been embattled all year. It missed interest payments in January while trying to deal with low revenues from slumping oil prices and the loss of its stake in Colombia’s Rubiales field. For years, it shared the rewards of the production and managed the operations of the nation’s largest oil field with state-controlled Ecopetrol. But in a decision that was announced in mid-2015, Ecopetrol chose not to renew the agreement and took over complete control of Rubiales in July 2016.
Pacific Exploration entered creditor protection in Canadian court earlier this year. It has established a restructuring plan and expects to come out of creditor protection as soon as next week on October 3.