Gulf expects $455m from Indonesian unit's IPO
Gulf expects $455m from Indonesian unit's IPO
CALGARY (Reuter): Gulf Canada Resources Ltd expects to net US$285 million-$455 million from the public offering of its Indonesia oil and gas unit, all of which will be used for debt reduction, a Gulf Canada spokesman said on Friday.
Based on Gulf's expected price range for the unit's shares of US$17-US$23, Gulf Indonesia Resources would be left with US$75 million-US$100 million in working capital after various payments to its parent firm, Gulf's Dennis Martin said in a telephone interview from Denver.
Gulf said on Thursday it planned to issue 21 million common shares in the unit, of which 14.2 million would be offered by Gulf Indonesia and 6.8 million by parent firm Gulf Canada.
Underwriters would also have the option of acquiring an additional 3.15 million shares owned by Gulf Canada to cover over-allotments.
Gulf Canada shares on the New York Stock Exchange climbed in heavy volume on Friday after the Indonesia offering news and the company's report of winning 90 percent of Stampeder Exploration Ltd's stock in its friendly bid.
Gulf's NYSE shares were up 1/16 to 8-1/4 on volume of 1.3 million shares. In Toronto, Gulf was up 0.05 to 11.40.
A portion of the offering's net proceeds to Gulf Indonesia will be used to repay debt to its parent firm of about US$100 and pay a US$68 million special dividend to Gulf Canada. The rest would be used to partly fund Gulf Indonesia's capital spending, it said.
Meanwhile, net proceeds to Gulf Canada for the sale of its Gulf Indonesia shares, the loan repayment and special dividend from the Indonesia unit would be used to help pay down its own debt, pegged at a post-Stampeder takeover level of C$3.1 billion.
Gulf Chief Executive J.P. Bryan has said he set a yearned debt target for Gulf of C$2.2 billion and was shooting for investment grade status for Gulf debt.
Other debt-reduction moves this year include a planned sale of its Zama-Virgo Alberta oil property and sales of other Canadian assets.
Gulf Indonesia is a partner with Talisman Energy Inc and state-owned oil company Pertamina in the development of the Corridor Block gas project.
The project is expected to begin shipping gas by mid-1998. Production was expected to hit 300 million cubic feet a day by the fourth quarter of next year and climb later to about 330 million.
The gas will be used as fuel for the Duri steam flood oil recovery operation operated by PT Caltex Pacific Indonesia and for power generation on Batam Island.
Gulf's Sumpal gas play, also on the Corridor Block, could provide the basis for up to three more projects the size of the Corridor project, Martin said.
"By January we'll have three more wells that will pretty well tell us what's possible out of there," he said. "It's a little too early to say right now, but the early indications are that it's all one big structure."