Fletcher sales will fund expansion

By Mark Reynolds

Fletcher Challenge Energy is expected to sell assets to eliminate most of its debt over the next few months, ready for a fresh spend-up on new oil and gas exploration and production businesses.

Assets likely to be sold include the company's 68 per cent stake in the Maui gas pipeline and its 15 per cent holding in listed oil refining company New Zealand Refining Co. The sale of those assets could bring in more than $300 million, on top of the $215 million the company expects to receive for the sale of its one-third stake in National Gas Corporation.

All of the proceeds will be used to reduce debt. The company's term debt stood at $389 million at the end of December, while total liabilities were $886 million.

Fletcher Energy communications manager Stephen Jones said the NGC sale would reduce his company's debt-to-equity ratio to about 25 per cent, compared with the 40-50 per cent that is usual for an oil exploration and production company. That meant the company was getting into a position to regear itself for further expansion, he said.

Fletcher Energy chief executive Greig Gailey agreed further sales of non-core assets were likely, but he was unwilling to give details. However, he stressed the sales would not include the company's Challenge retail chain of petrol stations.

"Our growth strategy is now focussed on the exploration and production of oil and gas," he said. "Rigorous acquisition and exploration portfolio management is a key industry success factor and we intend that our team will be at the forefront of world's best practice in this discipline," he said.

Mr Jones said Fletcher Energy had no intention of buying back into assets held within NGC. Fletcher Energy shares closed up 9 cents at $5.10 yesterday.