Azonto Petroleum sees further delay at Gazelle

By Amy McLellan

As its results make clear, Azonto Petroleum is focused on one goal in 2015 and that’s seeing its Gazelle project in Cote d’Ivoire through to FID. The company, which is listed on ASX and AIM, has cut headcount, slashed G&A and pared down its portfolio to ensure it has the funding to survive until the operator Vioco Petroleum pushes the button on Gazelle.

This, unfortunately, has been delayed. It had been hoped an FID would be reached before mid-year but in March it became clear that the lump sum price on the construction contract, received from Rosetti Marino, was higher than expected. The contract has been retendered, which in a weaker market should result in more competitive bids but inevitably means a delay in the schedule.
This means Azonto’s limited resources need to stretch further.

Azonto ended 2014 with almost A$7 million in cash and reported a post-tax net loss of A$19.6 million, a large part of which was down to the decision to withdraw from its Accra Block offshore Ghana, which prompted an A$12.8 million impairment on the asset.

Steps have been taken to minimise cash burn but it’s far from clear that this will be enough given the uncertainty in the timetable now that the contract is being retendered. The Board was reduced in December 2014, with Rob Shepherd and Andrew Rose resigning from their respective posts as Managing Director and Finance Director.

Gregory Stoupnitzky was appointed Managing Director and is running the company with Technical Director Jay Smulders and General Counsel Jeff Durkin. The non-execs on the Board have deferred all remuneration until the company returns to a sound financial footing. The micro-cap company is reviewing a range of strategic options to preserve shareholder value, including a sale of assets or the company itself.

Stoupnitzky said the company has “acted firmly to reduce costs in order to sustain operations”. “New business initiatives have been curtailed and our main focus is to crystallise value from our key asset, the CI-202 block,” he said.

Azonto has a 35 per cent stake in Vioco Petroleum, which in turn holds an 87 per cent operating working interest in offshore Block CI-202, which hosts Gazelle. Vioco’s working interest will be reduced to 71 per cent if state-owned Petroci exercises its 16 per cent back-in right, which will be decided in Q2 2015. Vitol E&P Ltd holds the remaining 65 per cent of Vioco.

The field development plan for the field has been approved by the authorities and in December the president of Cote d’Ivoire signed a decree granting a 25-year Exclusive Exploitation Area for Gazelle, a signal that this gas project is being backed at the highest levels. In parallel, state-owned CI-Energies is working towards project sanction for the planned power plant co-located in Grand Bassam next to Vioco’s onshore gas processing plant.

CI-Energies has signed a non-binding MOU with a reputable international company which may finance, develop and operate the Grand Bassam IPP and upgrade the power line infrastructure for the proposed Vioco integrated gas-to-power project. The intention is for the scope and schedule for the IPP to be agreed by the end of May 2015.

The EIA on the Grand Bassam project has been submitted to the Cote d’Ivoire Environmental Agency with a view to obtaining formal approval by mid-May 2015. Had the project achieved sanction around mid-year, there would be a 15 month construction period to first gas in H2 2016. This will now be pushed further out.