re: partner has debt problems with galoc Yes hard to see Otto...

re: partner has debt problems with galoc Yes hard to see Otto getting out of this one ...imo ... Nido was prudent to 'pay its way' thru the development ...this is AED revisited as far as OEL is concerned ...imo

Tuesday, December 16, 2008


Cheap crude imperils payment of Galoc debt


GALOC Production Co. (GPC) has been unable to meet its obligations due to delays in oil production at the offshore Northwest Palawan basin, and to low crude prices.

In a statement, Otto Energy Ltd., which along with the Vitol Group owns Galoc, said that delays in the project’s start up production combined with the recent fall in oil prices have resulted in revenues being “significantly less than originally budgeted.”

“This has resulted in GPC being unable to meet all its original debt repayments under the non-recourse portion of the project’s debt facility from production cash flow,” Otto said. A non-recourse debt means that creditors cannot secure a debtor’s other assets for repayment.

The Galoc field’s maiden production was originally scheduled in April but mechanical problems coupled with weather disturbances pushed this to October.

The contractual and operational delays led project costs to balloon from $86 million to over $120 million.

Otto said that its share of the original debt facility stood at $20.42 million, of which it has contributed $6.91 million to repayments, with a non-recourse component worth $10.40 million.

The company said that Galoc Production Co. has already agreed with lenders to a “cash sweep” priority repayment program for the non-recourse portion of the debt facility. This means creditors would have to rely on any free cash flow for debt payments.

In light of this, Otto said that all available Galoc Production Co. revenues after deducting operating costs are therefore currently being applied to the repayment of its obligations.

Aside from this, cash dividend payments to Otto would be delayed until the Galoc Production Co. debt has been repaid, “which is expected to be sometime in the late second to early third quarter of 2009, depending on oil price and production rates,” it added.

Galoc is run by a consortium led by Galoc Production Co. , and its partners, namely Nido Petroleum Ltd, Oriental Petroleum and Minerals Corp. Linapacan Oil Gas & Power Corp., The Philodrill Corp., Forum Energy Philippines Corp., Alcorn Gold Resources Corp. and PetroEnergy Resources Corp.

To date, the field has produced over 770,000 barrels of crude at a rate of 13,000 to 14,000 barrels a day.
-- Euan Paulo C. Añonuevo