Thursday, Aug 09, 2012

By Iain Packham

LONDON--Dublin- and London-listed oil company Petroceltic International PLC (EG5.DB) is in the process of raising funds to develop its flagship Ain Tsila natural-gas field in Algeria, including selling an 18.4% stake in the field and raising project financing, Chief Executive Brian O'Cathain said Thursday.

Mr. O'Cathain told Dow Jones Newswires that he expects it will cost about $1.5 billion to get the project into production in 2017, with development work starting in 2014. At March 31, Petroceltic had $64 million in cash and no debt.

Petroceltic currently has a 56.6% stake in the project, with state-company Sonatrach holding 25% and Italy's Enel SpA (ENEL.MI) holding 18.4% that it bought from Petroceltic last year for about $100 million.

Mr. O'Cathain expects the upcoming stake sale to significantly trump the price it got from Enel, and he expects that a deal will be announced early 2013.

"When we did the original deal with Enel, we'd already drilled three wells and proved up 6 trillion cubic feet of gas. Today, we're nearly 11 trillion cubic feet of gas and we've got much more certainty once they're proved, so there's a lot more value there," the CEO said.

He expects a deal to comprise a cash payment as well as the funding of a portion of Petroceltic's development costs, or a loan to be repaid from future production.

"That doesn't encumber the project, so we're still able to go out and put project finance on top of that. It just helps us get over our funding gap," he said.

"Let's say half of that is addressed by the consideration we get from selling our new tranche of 18.375%, more than half of that will be project finance, so our residual equity exposure is going to be $150 million, which is manageable," Mr. O'Cathain said.

"We are fully funded through to the end of 2013 and we're anticipating that if we get a good farm-out [stake sale] done, we won't have to fund again to deliver first gas," he said.

"I would hope that some of the discount that our stock labors under will be unwound by this big step in bringing Algeria closer to certainty," he said.

The development plan for Ain Tsila has been submitted to authorities and should be approved in the next couple of months.

At 1050 GMT, Petroceltic shares in London were up 0.5 pence, or 5.2%, at 8.5 pence, in a slightly higher AIM index--up 0.2%.

Write to Iain Packham at iain.packham@dowjones.com

(END) Dow Jones Newswires

09-08-12 1100GMT