March 11, 2010 / 1:15 PM / 8 years ago

UPDATE 2-Galleon says reviewing strategic options including sale

* Says high cost of capital limits development

* Shares down 10 pct (Recasts; adds details, analyst comments; share movement)

By Gowri Jayakumar

BANGALORE, March 11 (Reuters) - Galleon Energy Inc GO.TO said it was reviewing strategic alternatives, including the sale of the company, as it continued to suffer from weaker natural gas prices, sending its shares down 10 percent.

The company, which posted a fourth quarter loss Thursday, said the high cost of capital has limited the speed at which it could develop and enhance its current assets, and that its stock was trading well below its net asset value.

Production volumes at Galleon were down about 7 percent to 15,976 barrels of oil equivalent per day in 2009, hurt by reduced drilling.

“Galleon’s biggest problem was not drilling enough wells to offset their depletion, and it was because of the lack of cash flow,” Maison Placements analyst Josef Schachter said.

“So if you don’t drill enough, then you don’t offset your declines, and you don’t show production growth.

The board is in the process of formally retaining GMP Securities LP, Cormark Securities Inc and Macquarie Capital Markets Canada Ltd, as financial advisors, the company said.

For the fourth quarter, the oil and gas company posted a loss of C$5.7 million, or 7 Canadian cents a share.

For the full year 2009, funds from operations fell 60 percent to C$97.4 million, while total revenue dropped 52 percent to C$177.1 million.

Shares of the Calgary, Alberta-based company were down 10 percent at C$7.43 Thursday afternoon on the Toronto Stock Exchange. They touched a low of C$7.38 earlier in the day. (Reporting by Gowri Jayakumar in Bangalore; Editing by Aradhana Aravindan, Bijoy Koyitty)

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