TIRANA, March 20 – Canada-based Bankers Petroleum has signed a preliminary deal with China’s Geo-Jade Petroleum Corporation to sell its major Albania assets and a newly acquired minor oil block in Hungary for a reported C$575 million (€392 mln). The surprise announcement comes as the country’s biggest oil producer has recently been facing tough times after more than a decade of operations in Albania due to a sharp cut in international oil prices and tax and environmental disputes with the Albanian government.
Under the preliminary deal, Bankers Petroleum is set to be acquired by 1958082 Alberta Ltd and Charter Power Investment Limited, both affiliates of Geo-Jade, one of the largest independent oil and gas exploration and production companies in China.
David French, the President and CEO of Bankers Petroleum described the proposed deal as positive for both current Bankers shareholders and the company’s future in Albania.
“The proposed transaction provides Bankers with the opportunity to return value to our shareholders at a significant premium to the current market valuation, while offering Bankers added financial resources to accelerate our activity in Albania and capitalize on the potential created by the current commodity price environment,” he said as quoted in a statement.
“This transaction will generate substantial economic benefit for Albania and the local communities in which Bankers operates. We look forward to working alongside our new investors to deliver the asset possibilities before us,” he added.
The transaction price represents a premium of 98 percent over Bankers’ closing share price on the Toronto Stock Exchange (“TSX” ) of C$1.11 on March 18, 2016.
The Canada-based company has seen its shares drop from a record C$ 7.4 in mid-2014 when oil prices were at historic high to a current C$1.11 after oil prices hit a 12-year low and tax disputes with the Albanian government escalated.
Completion of the arrangement is subject to customary closing conditions, including receipt of court, shareholder and regulatory approvals, such as those required under the Investment Canada Act and approvals required by the People’s Republic of China, the company said.
Albania’s energy officials say the deal between Bankers and the Chinese company does not require approval by the country’s authorities but they expect the Chinese to strictly follow the company’s commitments in Albania.
If completed, the deal would make China one of the country’s biggest foreign investors. Last year, China emerged as the country’s second largest trading partner, overtaking traditional partner Greece. However, the sharp cut in mineral prices has already sharply affected Albania’s chromium exports to China.
Thanks to huge oil investment mainly by Bankers Petroleum but also some other companies in the oil and mining industry, Canada had turned into the country’s second largest foreign investor in Albania in the past few years.
Geo-Jade Petroleum, which engages in the exploration and production of oil and gas, has emerged as one of the largest non-state listed oil company in China by output and market capitalization with its main assets located in Kazakhstan.
Bankers Petroleum’s rise and fall
The announcement of the deal comes soon after Canada-based Bankers Petroleum suffered losses of $3.6 million in 2015 when oil prices almost halved to an average of $52/barrel forcing the country’s largest oil producer to cut production and sales.
The 2015 losses follow record high profits of about $129 million in 2014 when international oil prices embarked on a downward trend that has taken them to a 12-year low. The 2015 financial situation is the worst the company has faced since its early years of operation in the country in 2004-2009.
Bankers says average oil production in 2015 dropped by 6 percent to 18,385 barrels of oil per day to handle the sharp cut in international oil prices.
The company’s 2015 investments also halved to $144 million while royalties to the Albanian government dropped to $40 million, down from $86 million in 2014.
In late 2015, Bankers Petroleum diversified its investments to Hungary by acquiring an oil exploration block where it plans to invest a total of €12.3 million over a three and a half year contractual term.
Canada-based Bankers Petroleum recently suspended arbitration proceedings against Albania by agreeing to hire a third-party auditor over a $57 million tax dispute with the Albanian government.
Eleven years after launching its operations in the Patos-Marinze heavy oilfield under a 25-year concession deal with the Albanian government, Bankers Petroleum has not started paying profit tax yet, which under Albanian law, companies operating in the oil industry pay at a 50 percent rate only after meeting their investment costs.
Back in April 2015, Bankers Petroleum came under fire after an incident involving the explosion of two oil wells forcing the evacuation of some sixty local households. The Albanian authorities also questioned if the country’s largest foreign investor and exporter has paid all its taxes.
Bankers Petroleum says it has invested $1.4 billion during its 11 years of operations in Albania, becoming the largest foreign investor and employing over 1,500 people.
Since 2004, Bankers operates and has the full rights to develop the Patos-Marinza and Kuà§ova heavy oilfields under a 25-year concession contract with the Albanian government. The Patos-Marinza oilfield is the largest onshore oilfield in continental Europe, holding approximately 5.4 billion barrels of original oil in place. The Kuà§ova field has 297 million barrels of original-oil-in-place.
