PNG’s national petroleum company Kumul Petroleum Holdings Limited (KPHL) has confirmed it has divested its 9.8% stake in the country’s biggest oil and gas reserve holder, Oil Search Limited.
The divestment was executed by unwinding the equity collar loan with J.P. Morgan Securities and UBS AG Australia Branch.
While KPHL has ceased to have any interest in Oil Search shares it continues to be responsible for managing the State’s 16.77% equity interest in the PNG LNG Project.
“As a close partner of Oil Search in Papua New Guinea, we look forward to continued close cooperation with Oil Search on our numerous projects, both current and future,” KPHL managing director Wapu Sonk said.
“People need to understand that the UBS Collar Loan was not a normal loan. It was a Collar Loan where the value of the parcel of shares on any day supported the loan itself, which in this case was approximately 149 million shares. This meant there was never any other security provided and the Collar was protected by placing a series of calls and puts options. The majority of the shares were hedged by UBS and JP Morgan, hence only about 31 million shares were block traded yesterday (Thursday) as part of the unwind process.”
Kumul Petroleum chairman Sir Moi Avei said KPHL had reviewed its investment in the Oil Search shares before he joined as chairman and the company had waited for the right moment to act. He said the divessture was done at a time when Oil Search shares were trading in its favour, and KPHL made about A$35 million as a result of the transaction.
“Under the current oil and LNG price environment and the long-term view that oil prices will stay ‘about the same for next few years’, rolling the Collar was not sustainable for KPHL. KPHL has a responsibility to fund its share of the Papua LNG Project, build the POM Gas to Electricity Plant and invest in other Petroleum and Energy opportunities,” Sir Moi added.