Sumary of Arakis Conference Call
Arakis Energy Says Pres Resigned Over Disagreement With Bd
CALGARY (Dow Jones)--Arakis Energy Corp. (AKSEF) said John McLeod, its former
president and chief executive, resigned over a ''difference of opinion'' with the company's board.
During a teleconference, Lutfer Khan, who was recently named chief executive of Arakis,
succeeding McLeod, and is also the company's chairman, said Arakis' board believes the
company should develop a closer working relationship with the Sudanese government and its new
partners in a consortium to develop a large oil production and pipeline project in Sudan. He said
McLeod disagreed.
Khan said McLeod remains a director of Arakis and that he remains president and chief executive
of a small publicly-traded Canadian oil and natural gas company in which Arakis is a major
shareholder. He said Arakis is negotiating terms of a separation agreement with its former chief
executive.
Khan said Arakis has named Ernie Pratt, formerly the company's vice-president of exploration, as
president and chief operating officer.
He said the company also named James Taylor, a former head of oil and gas exploration for
Occidental Petroleum Corp. (OXY), as a director.
Khan said Arakis plans to expand its five-member board to include more directors with
international business experience. He said the company also has agreed to appoint a nominee of
Sands Petroleum to its board following Arakis' next annual meeting.
Arakis is a Calgary oil and natural gas company that holds a 25% interest in an international
consortium operating in Sudan. Sands, a closely-held oil and gas company operating in Sudan, has
recently become a major shareholder of Arakis.
Arakis Energy Corp. (AKSEF) president and chief executive Lufter Khan estimated the total cost
of the Sudanese oil project at $1 billion. He said the company has already invested $120 million in
the project and has been granted a $175 million investment credit under terms of the consortium
agreement. Under the agreement, Arakis' other partners, which include oil companies owned by
the governments of China, Malaysia and Sudan, must invest $525 million in the project before
Arakis will be required to spend anything further, Khan added. So far, they have spent about $55
million, he said.
Khan said that the agreement also calls for Arakis to receive the first $100 million of oil production
revenue from the Sudanese project. He said the consortium partners are considering financing the
pipeline portion of the project through debt.
However, Pratt said Arakis hasn't ruled out further equity financing, despite concerns raised by a
number of shareholders during the conference call about dilution of Arakis stock. Pratt estimated
Arakis will need to raise between $100 million and $150 million of debt or equity to cover its
share of spending to complete the Sudanese project.
Khan said Arakis is proceeding with a plan to buy back 10% of its shares, but noted the board
doesn't plan to cut back the number of stock options to be issued to Arakis officers and directors.
Ernie Pratt, president and chief operating officer of Arakis Energy Corp. (AKSEF), said the
company is in the final stages of negotiating an agreement with its partners on construction of a
pipeline to carry oil from southern Sudan to a Red Sea export terminal. He said a decision will be
made within the next few weeks on whether the pipline's diameter will be 28 inches or 30 inches.
Lufter Khan, chief executive and chairman, said the consortium expects to issue bid packages to a
short-list of companies interested in building the pipeline by late fall of this year. He said he expects
the pipeline to be in service by the end of 1999.
Pratt said current plans call for building a pipeline with capacity to transport 250,000 barrels a day
of oil, of which 150,000 barrels a day would be reserved for the Arakis consortium. He said the
consortium expects to charge a tariff of $6 a barrel for third-party oil transportation through the
proposed pipeline.
With no immediate capital spending commitments in Sudan, Arakis is pursuing other international
operations, including an oil project in Oman, Khan said.
Pratt said the company expects to release results from a test well in Sudan that is rumored to have
made a large discovery within the next two to three days. |
