April 9, 2015 / 6:59 PM / 2 years ago

Canadian oil company to liquidate due to crisis in Yemen

2 Min Read

CALGARY, Alberta (Reuters) - Canadian oil and gas producer Calvalley Petroleum Inc said on Thursday it will liquidate and restructure due to the political crisis in Yemen, where it has almost all of its operations.

The Calgary-based junior has a 50 percent working interest in a block in Yemen's Sayun-Masila Basin, producing 3,700 barrels per day gross, but was forced to shut down production on Tuesday as conflict in the Middle Eastern country escalated.

The block is owned by the Yemeni government.

Saudi Arabia and Arab allies have launched air strikes against the Iran-allied Houthi movement in Yemen, which has taken most of the country and forced President Abd-Rabbu Mansour Hadi to flee to Riyadh.

The company said its efforts to diversify out of Yemen or sell itself or its assets had not resulted in "compelling" opportunities.

Under the restructuring, shareholders will have options to buy shares in the company's unlisted unit, Calvalley Energy Ltd. Those who decide not to will receive cash. Calvalley's financial chief said both options are better than trying to sell one's shares.

"With the current events in Yemen and lack of other alternatives we think this is the best position for shareholders at the moment," said Gerry Elms, Calvalley chief financial officer.

Shareholders will vote on May 8 on whether to take shares in Calvalley Energy Ltd, a private subsidiary in Cyprus.

Elms said there may be an opportunity to list Calvalley Energy Ltd as a public company in future, but much would depend on the situation in Yemen and whether production is able to resume.

"We have no indication when or if things in Yemen are going to improve. It's difficult to put a crystal ball in front of you and say what will happen," he added.

Calvalley also has a small working interest in a property in Saskatchewan, Canada, although Elms said that related to reclamation liabilities.

Additional reporting by Anannya Pramanick in Bengaluru; editing by Saumyadeb Chakrabarty and Matthew Lewis

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