SEOUL (Reuters) - State-run Korea National Oil Corporation (KNOC) said it is considering selling ‘non-core parts’ of its loss-making Canadian energy subsidiary Harvest Operations and reviewing other overseas assets for potential sale of some of their parts.
The plans come after South Korea initiated a review of its overseas investments in oil and gas due to poor profitability, particularly those made in the last five years.
Asia’s fourth-largest economy is heavily dependent on energy imports and rapidly expanded overseas investments to develop oil and gas reserves between 2008 and 2012, as it grappled with inflation driven by costlier imports.
But a new government starting this February has said it is focused more on quality than quantity of its energy investments.
South Korean media, citing KNOC chief executive Suh Moon-kyu as telling reporters, had said earlier in September that KNOC plans to sell Harvest Operations.
“We are considering selling only non-core assets of Harvest,” KNOC Senior Executive Vice President Joong-hyun Kim told reporters on Tuesday, adding that some buyers had indicated interest in them.
“Not only Harvest, we are currently re-evaluating all of our overseas assets including Dana and could sell non-core parts of those, not to scale down our size but to reinforce our business, although nothing has been decided,” he said, referring to UK-based Dana Petroleum that it acquired in 2010.
KNOC bought the Canadian oil and gas trust Harvest for $1.7 billion in 2009. Harvest reported a net loss of 720 million Canadian dollars in 2012.
Pengrowth Energy Corp (PGF.TO) and Canadian Natural Resources Ltd (CNQ.TO) had “unofficially” contacted Harvest to show their buying interest in some assets of Harvest, Jeong Chang-seok, director & executive vice president at KNOC, told reporters.
Pengrowth and Canadian Natural Resources could not be contacted by Reuters immediately, outside of normal office hours.
Harvest sold $80 million worth of its assets last year via 20-30 transactions, Jeong said, adding such sales are routine.
Deutsche Bank is now evaluating “some non-core parts” of Harvest assets, he said. But he denied a media report that the bank was chosen to lead efforts to sell the Come-by-Chance refinery in Newfoundland, Canada.
“Deutsche Bank is evaluating some of non-core assets in Harvest including its refinery to conduct advisory works for the exit strategy,” Jeong said. “To us, the refinery is non-core part but that does not mean that we will sell it for sure.”
KNOC has no bad loans and can lower much of its debt if it sells overseas assets, said senior executive vice president Kim. The state-run firm considers its oilfields in Kazakhstan promising, he said, adding it would make efforts to develop them.
Editing by Muralikumar Anantharaman