Aleem Khan

Cana­da's Cal­gary, Al­ber­ta-head­quar­tered Niko Re­sources Ltd yes­ter­day es­ti­mat­ed it will make US$1 bil­lion from its nat­ur­al gas re­serves in T&T. In a state­ment re­leased with the com­pa­ny's re­sults for the year end­ed March 31, (2014), Niko said: "The com­pa­ny's es­ti­mat­ed re­serves as at March 31, 2014 in­clud­ed 197 bil­lion cu­bic feet (Bcf) of proved nat­ur­al gas re­serves and 235 Bcf of proved plus prob­a­ble nat­ur­al gas re­serves re­lat­ed to its in­ter­est in Block 5c in T&T that was sold sub­se­quent to March 31, 2014."

Af­ter ad­just­ing for the sale of the com­pa­ny's in­ter­est in Block 5(c) in T&T, which closed in the cur­rent quar­ter (from April to June, 2014) "the es­ti­mat­ed ag­gre­gate af­ter-tax net present val­ue of fu­ture net rev­enue at­trib­ut­able to the com­pa­ny's es­ti­mat­ed proved plus prob­a­ble re­serves (dis­count­ed at 10 per cent and es­ti­mat­ed us­ing fore­cast prices and costs) as at March 31, (2014) is ap­prox­i­mate­ly US$1 bil­lion, " the state­ment said.

Niko sold its 25 per cent in­ter­est in Block 5c to a sub­sidiary of the British Gas Group of the UK. The BG Group al­ready had the re­main­ing 75 per cent in­ter­est in the block off the east coast of Trinidad.In its mes­sage to share­hold­ers, Niko's board of di­rec­tors said that in the sec­ond quar­ter of fis­cal 2014, the com­pa­ny adopt­ed a new busi­ness strat­e­gy that in­cor­po­rates three prin­ci­ples, the first of which is to "fo­cus on val­ue gen­er­a­tion in the D6 Block" in In­dia.

The sec­ond prin­ci­ple is to "re­duce the com­pa­ny's ex­po­sure to fu­ture drilling com­mit­ments in its ex­plo­ration port­fo­lio while, if pos­si­ble, main­tain­ing op­tion­al­i­ty to ben­e­fit from the ex­plo­ration po­ten­tial in the port­fo­lio, " and the third prin­ci­ple is to "con­tin­ue to re­struc­ture the com­pa­ny to cre­ate the nec­es­sary fi­nan­cial strength and flex­i­bil­i­ty to re­alise the in­her­ent val­ue of the com­pa­ny's as­sets."

In the third quar­ter of fis­cal 2014, Niko closed on its US$340 mil­lion debt fa­cil­i­ty while si­mul­ta­ne­ous­ly rais­ing ap­prox­i­mate­ly US$30 mil­lion (net) in eq­ui­ty.

"Through this fi­nanc­ing, the com­pa­ny re­bal­anced its debt oblig­a­tions, ex­tend­ed the ma­jor­i­ty of its debt ma­tu­ri­ties out to cal­en­dar 2017, fi­nalised a set­tle­ment agree­ment for its long-term drilling con­tracts, and added US$174 mil­lion in cash to the com­pa­ny's bal­ance sheet, thus pro­vid­ing fund­ing and time for ex­e­cu­tion of the com­pa­ny's new strate­gic fo­cus," the state­ment said.

Niko ceas­es ex­plo­ration in T&T

Niko al­so said it im­ple­ment­ed over the past year, the "sus­pen­sion of ex­plo­ration ac­tiv­i­ties out­side of In­dia. "Niko, one of the largest acreage hold­ers in T&T, said: "Ex­plo­ration ef­forts ceased in In­done­sia, Trinidad, Mada­gas­car, and Brazil, with drilling and tech­ni­cal staffing re­duced sig­nif­i­cant­ly. Ac­tiv­i­ties in these coun­tries are now fo­cussed on farm-outs and/or sales of work­ing in­ter­ests along with ex­ten­sions of drilling oblig­a­tions or mod­i­fi­ca­tions of terms. "

In ad­di­tion, the com­pa­ny said it ini­ti­at­ed dis­cus­sions with its ven­dors in In­done­sia and Trinidad to­ward "set­tle­ment of the payables ac­crued from its drilling pro­grammes."Niko said it is al­so ex­pand­ing its board of di­rec­tors."Four new in­de­pen­dent di­rec­tors joined the board, bring­ing ex­per­tise and in-depth ex­pe­ri­ence in cor­po­rate turn­arounds and re­build­ing, and the board formed a spe­cial re­struc­tur­ing com­mit­tee to di­rect­ly over­see the com­pa­ny's re­struc­tur­ing ef­forts," the state­ment said.

Niko said it is al­so im­ple­ment­ing changes in man­age­ment. "New ex­ec­u­tive tal­ent joined the com­pa­ny with prac­ti­cal ex­pe­ri­ence in fi­nan­cial re­struc­tur­ing and the com­pa­ny hired an in-house gen­er­al coun­sel. The com­pa­ny al­so re­tained spe­cialised con­sul­tants to ad­vise on the many tech­ni­cal as­pects of cor­po­rate re­struc­tur­ing."

Look­ing for new CEO

Niko said its board re­tained a search firm to iden­ti­fy can­di­dates for a new chief ex­ec­u­tive of­fi­cer who is to pro­vide the lead­er­ship to com­plete the com­pa­ny's re­struc­tur­ing and de­vel­op the strate­gic roadmap for fu­ture val­ue growth of the com­pa­ny.

In the first quar­ter of fis­cal 2015, the com­pa­ny sold its in­ter­est in the Block 5(c) as­set, pro­vid­ing funds to re­pay US$15 mil­lion of its set­tle­ment oblig­a­tion for its drilling con­tracts and US$20 mil­lion of the short-term "Fa­cil­i­ty E por­tion" of the term loan, and adding an ad­di­tion­al US$26 mil­lion in cash to the bal­ance sheet. At the time of sell­ing to the BG Group, Niko had said it was sell­ing for gross pro­ceeds of US$62 mil­lion.

Niko said it is now deal­ing with the de­ci­sions of the gov­ern­ment of In­dia to de­fer, first in March and now in June, the no­ti­fi­ca­tion of the nat­ur­al gas price cal­cu­lat­ed from the pric­ing for­mu­la in the Do­mes­tic Nat­ur­al Gas Guide­lines, 2014 that the gov­ern­ment of In­dia had no­ti­fied ear­li­er in the year.

In the opin­ion of the con­trac­tor group of the D6 Block, the In­di­an gov­ern­ment has con­tra­vened the terms of the D6 pro­duc­tion shar­ing con­tract (PSC) and, as a re­sult, the con­trac­tor group filed an ar­bi­tra­tion no­tice against the gov­ern­ment seek­ing im­ple­men­ta­tion of the guide­lines in ac­cor­dance with the terms and con­di­tions of the PSC.The D6 con­trac­tor group will try to work with the gov­ern­ment to achieve a prompt and ef­fi­cient res­o­lu­tion to this dis­pute, the state­ment said.

For the year end­ed March 31, Niko deep­ened its loss­es by US$441 mil­lion. For the year end­ed March 31, 2013, Niko post­ed a loss of US$216 mil­lion, and then more than tripled that fig­ure at the end of its 2014 fis­cal year to US$657 mil­lion.