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Ophir Energy signs up LNG buyers for Fortuna

Published: 22:32 09 Dec 2015 AEDT

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Fortuna is advancing on schedule, says CEO Nick Cooper

Ophir Energy (LON:OPHR) told investors it has signed up buyers for the production from the planned Fortuna liquefied natural gas project, offshore Equatorial Guinea.

Heads of agreement have been signed with a total of six customers, all of which are said to be established LNG buyers and are in either European or Asian markets.

The deals see the company selling a total of 2.2mln tonnes of LNG offtake, though it says the total requested demand from the customers would’ve seen that amount sold several times over.

Ophir estimates that, due to the pre-payment terms, it could fund between 30-50% of its costs to first LNG as a result of the offtake deals.

The company also told investors that ongoing engineering design work indicates the cost of development will be less than previously estimated, and as such it has downgraded its gross capex forecast for the project to US$600mln from US$800mln (which means Ophir’s 80% stake in the project will equate to US$480mln).

Nick Cooper, Ophir chief executive, said the project continues to move forward on schedule.

“This cost reduction, plus the offered LNG pre-payment mechanisms materially reduce the amount required to fund Ophir's portion of the project ahead of the Final Investment Decision in mid-2016," he said in a statement.

Cooper added: “Each offtaker's proposal offers something different, thereby providing Ophir with a range of pricing formulae and differing commodity risk profiles which will be helpful when we narrow down the short list in Q1 2016.”

James Hosie, analyst at Barclays Investment Bank,  in a note said: “Confirmation that demand is several times higher than available volumes is a good endorsement for the robustness of the project and keeps it on schedule for a Final Investment Decision in mid-2016.”

Barclays rates Ophir as ‘overweight/positive’ and has a 130p target price for the group.

Ophir shares advanced 2.8p, 3.22%, to trade at 89.80p.

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