CUE ENERGY says it has received early buyer interest for its onshore production and exploration portfolio in Papua New Guinea, with the company even saying it has been approached by supermajors.
The Melbourne-based company is currently testing the waters for a potential sale of its PNG assets which includes a small interest in the South East Gobe oil and gas field and discovered resources in two retention licences.
However, Cue chief executive David Biggs cautioned that it would only divest the company’s PNG portfolio if the price was right.
“No firm decision has been made to divest,” Mr Biggs told PNG Resources in August.
“At this stage we are just seeing what the market will propose to us.”
With the company’s focus currently on its Australia and New Zealand permits, and with no plans to grow its business in PNG, Cue considers its interests there as non-core.
“Given our relatively small interest in the permits it made more sense for us to see whether or not the market values them more than we do and if they do then we’ll make a decision whether or not to sell,” Mr Biggs said.
Cue has a 5.6% stake in PDL 3 which contains a portion of the South East Gobe (SEG) oil and gas field operated by Oil Search. Cue has a 3.3% stake from any future oil produced from the SEG unit and a 2.6% interest from future gas output.
SE Globe is currently producing about 1,500 gross barrels of oil per day with gas being reinjected.
As oil production naturally declines, the field will transition to gas production and is expected to supply the PNG LNG project from the second half of next year at up to 35 MMscf per day.
Retention licences PRL 14 and PRL 9 are also operated by Oil Search with Cue’s interest sitting at 10.9% and 14.9% respectively.
PRL9 contains the Barikewa gas discovery with a 2C resource of 299 billion cubic feet and an upside 3C resource of 823 BCF
Mr Biggs said Cue’s PNG portfolio could prove attractive to a range of different companies with opposing strategies.
“The first thing is that there are people out there who are interested in buying into producing assets no matter how small they may be and there is possibility of some production upside in the producing asset,” he said.
“The other thing is there may be people interested in buying static gas resources who have a longer term time frame than we do in terms of waiting for those resources to be developed.
“It would be a very good entry opportunity for someone who is not already in PNG.”
With ExxonMobil’s PNG LNG project coming on line earlier this year, Mr Biggs said the sentiment in the country’s resource industry was fairly positive, which could bode well for any potential transaction.
“PNG is right up there in terms of oil and gas interest and there’s been an awful lot of focus and interest on the LNG side of the business in PNG,” Mr Biggs said.
“There’s been a lot of business done recently in PNG in the oil and gas space and I think that’s attracted a lot of oil and gas companies to have a hard look at the place.
“It’s not a bad time to sell if you’re going to sell given the level of interest there is in PNG generally at the moment.”
At the time of talking to Cue, the company had set the cut-off date for expressions of interest on 15 August. Cue kept mum on how many parties were accessing its data room, saying there were “several.”
“The amount of interest has surprised me,” Mr Biggs said.
“We’ve had interest from the supermajors through to small regional players.
Mr Biggs said the company had expected a smaller group pf established PNG players to take interest in what Cue had up for grabs, but said that instead they had had a mix of established PNG players and people who were interested in tapping into the country’s prospective gas resources.
“We’ve had a healthy level of interest,” Mr Biggs said.
While a deal isn’t set in stone, a notional timeframe for the completion of any potential transaction is expected sometime in October.
Mr Biggs said funds received from any sale would be put towards driving the company’s inorganic growth strategy, with Cue currently seeking new exploration opportunities in Australia and Asia. The company is also weighing up a future purchase of a producing asset, with a screening process for that already underway.
“I’m confident the company 12 months from now will look quite different to what it does now in terms of its asset mix,” Mr Biggs said.
As well as throwing some more producing assets into the mix, Cue is keen to get a “discovery or two” under its belt.
While Cue admits it is happy to hold on to its licences in PNG if an attractive offer isn’t put on the table, a partial exit from the country is underway with the company deciding to de-list its shares from the Port Moresby Stock Exchange. The move should be completed by the end of August.
“The reason we’re doing that is simply due to lack of volume through that exchange,” Mr Biggs said.
Cue will retain its listing on the Australian Securities Exchange.