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Interoil sells downstream business for $525M

INTEROIL has announced the sale of its Papua New Guinea oil refinery and petroleum products distribution businesses to Singapore-based Puma Energy for $US525.6 million.

The deal includes adjustments for cash and working capital and is intended to allow InterOil to focus on its higher-returning upstream and LNG business.

InterOil’s downstream businesses include the Napa Napa refinery in Port Moresby that processes about 28,000 barrels a day as well as 52 retail service stations, 30 fuel depots, terminals and aviation sites.

The acquisition will be entirely funded from Puma Energy’s existing bank facilities and available cash on balance and will enable to company to become a major supplier of fuel in PNG.

In a statement to the market, Puma said the acquisition represented its first investment in PNG and would complement the company’s existing global strategy of disciplined investing in fast-growing markets with a high demand for oil products.

The company said it would link the PNG fuel market with its global operations and retain the 725 InterOil workers employed in the refinery and downstream businesses.

InterOil chief operating officer Jon Ozturgut confirmed the sale followed an unsolicited approach from Puma Energy and a strategic review by InterOil of options for the best allocation of capital.

“For the past 10 years, the refinery and distribution businesses have contributed to InterOil’s business model and Papua New Guinea’s development,” Ozturgut said.

“However, our upstream and LNG business has become core to the company’s growth and, as a result of the success we have had in discovering and monetising gas, the time is right to focus on this part of our business.

“The transaction immediately provides additional capital to fund our upstream and LNG business.
“We believe this is in the best interests of Papua New Guinea and our shareholders.”

Ozturgut said Puma Energy ensured that PNG would have a world-class downstream business operator.

“We believe Puma Energy is the right company to take over, invest in and grow the downstream and refining businesses for the long-term benefit of Papua New Guinea,” he added.

As a condition of the sale, Puma Energy may use the InterOil downstream brand for up to 12 months.

Puma Energy and InterOil will begin the handover of operations and transition of staff immediately.

“We have been impressed by InterOil’s business, its strategic asset base, its customer portfolio and the quality of its management and people,” Puma Energy CEO Pierre Eladari said.

“There are many parallels between our global businesses and that of InterOil’s – in particular the importance of expertise in logistics, guaranteeing the reliable and secure supply of high quality fuels to our customers.

“We believe strongly in Papua New Guinea and its future growth prospects and see many opportunities for continued investment in infrastructure and in the skills of our employees to build upon the historic success of InterOil’s business and to position PNG as a strategic hub within our regional portfolio.

“This investment marks an important step in the execution of our regional strategy and offers considerable synergy with our developments in Australia and the broader Pacific region.”

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