Oil rat race

May 27, 2013, 3:56 am

Massive resignations and stock market dips over the past months at Brazilian oil company HRT which announced oil discoveries in Namibia last week, has left more questions than answers on whether the discovery was rushed or staged to ease the pressure.
The company’s founder and Chief Executive Officer Marcio Rocha Mello resigned a week before HRT announced its findings in Namibia.
 “I resign to the (sic) position of Chief Executive Officer of HRT, the Company I had proudly built in the last three years with a committed world-class team focused on the objective of building one of the major independent oil and gas companies in Brazil.
“I resign to the (sic) CEO position, but never to HRT. I remain as a member of the Board of Directors contributing with (sic) the Company on the achievements of its goals,” he said in a written statement.
John Willott, the Chairman of the HRT Board of Directors, said: “We deeply regret that Marcio Mello, the founder and CEO of HRT, had chosen to resign from HRT. The Board of Directors asked Marcio to reconsider his decision but Marcio declined.
“However, he will remain an active member of the Board, where he will work to advance the success of HRT. The Company will miss him. Marcio’s leadership and energy are unique.”
Mello is the founder of the Rio de Janeiro-based company which was incorporated in 2009 with the acquisition of a 51% interest in 21 blocks in the Solimoes Basin, in the Amazonas.
HRT currently has a portfolio of 36 exploration onshore and offshore blocks, including 10 blocks in Namibia, with an estimate of 7.9 billion barrels of oil equivalent among risked prospective and contingent resources
Mello was replaced by former engineering and production boss, Milton Franke but the company also said that HRT America boss Wagner Peres who also spoke for the company’s offshore Namibia prospects is stepping down.
Peres like Mello, will be maintaining a seat on its board, the company said.
These changes,  just weeks after the company spud its Wingat-1 well, the first in a trio of high-profile wildcat finds off Namibia and a week before the announcement of the oil find after N$810m had been exhausted over two months, left more questions than answers.
HRT shares plunged 9.7% in Sao Paulo following the news of the founder’s resignation, hence the announcement of oil find in Namibia, a week later could have been meant to boost the company’s stock market performance, especially when the oil discovered is “not for commercial value.”
The public announcement by Prime Minister Hage Geingob, at State House was kept a secret even from line Minister Isak Katali but is synonymous with the company’s love for the grand standing especially after it was launched amid pomp and funfair in 2011 by Namibia’s political and business heavy weights.
Naturally, President Hifikepunye Pohamba does not miss executive functions and if not available, he postpones, hence his assigning of Geingob whilst he was in town leaves a trail of the President’s sceptism.
"Ask the Prime Minister where the President was because obviously he was briefed," said Pohamba’s spokesperson Dr. Mukwaita Shanyengana.
Namibia’s HRT office has not been immune to these resignations too.
Brazilian Nelson Narciso Filho, HRT Africa President walked away from his Namibian office last year under unclear circumstances.
His resignation was followed by that of HRT Namibia head of geology Frank Messa, administrator, Helena-Ella Nghifindaka, and human resource executive Michelle Heita who has since joined Air Namibia.
This as HRT ran up red ink in the first quarter on the back of a general lack of revenues and higher expenses while disposal gains were down.
The company made a loss of approximately N$500m (U$49.15m) in the three months till end of March.
This compared with a profit of N$250m in the comparable period a year earlier which was, however, largely due to the sale of a 45% stake in its Solimoes Basin assets to Russian outfit TNK Brasil.
Without this sale, last year’s first quarter would have left HRT minus N$505m.
Revenues in this year’s first quarter were just N$9.4m as against N$14m as subsidiary Ipex saw reduced services to third-party clients, while HRT also had a lower cash balance and interest rates.
In the quarter HRT agreed to sell its Air Amazonia offshoot, complete with a fleet of 14 helicopters, to Erickson Air-Crane for N$650m, also landing a three-year services’ deal in return in the Solimoes Basin.
More recently it snapped up BP’s 60% share of the Polvo field in the Campos Basin for $135m.
When HRT began their offshore oil and gas drilling in Namibia in April, the company’s stock price jumped more than 19% in Sao Paulo trading, but Reuters reported a day before the oil find in Namibia that HRT’s shares had fallen more than 90% from an all-time high in 2011.
The Villager has sent questions to HRT’s investment relations department enquiring whether Mello and Peres resigned to avoid being fall guys of the Namibian project or the recent announcement were meant to save the company’s ailing fortunes.
At the time of going to press, HRT had not responded to our questions but a disclaimer on its website offered a few clues; “Although HRT management believes that the expectations represented in such forward-looking statements are reasonable, there can be no assurance that such expectations will prove to be correct.
“By their nature, forward-looking statements require us to make assumptions and, accordingly, forward-looking statements are subject to inherent risks and uncertainties.
“We caution readers of this news release not to place undue reliance on our forward-looking statements because a number of factors may cause actual future circumstances, results, conditions, actions or events to differ materially from the plans, expectations, estimates or intentions expressed in the forward-looking statements and the assumptions underlying the forward-looking statements.
“The following risk factors could affect our operations; the contingent resource and prospective resource evaluation reports involving a significant degree of uncertainty and being based on projections that may not prove to be accurate; inherent risks to the exploration and production of oil and natural gas; limited operating history as an oil and natural gas exploration and production company; drilling and other operational hazards; breakdown or failure of equipment or processes; contractor or operator errors; non-performance by third party contractors; labour disputes, disruptions or declines in productivity; increases in materials or labour costs; inability to attract sufficient labour; requirements for significant capital investment and maintenance expenses which HRT may not be able to finance; cost overruns and delays; exposure to fluctuations in currency and commodity prices; political and economic conditions in Namibia and Brazil. . .”
The company’s statements herein are made based on the assumption that HRT’s plans and operations will not be affected by such risks, but that, if their plans and operations are affected by such risks, the forward-looking statements may become inaccurate.
But head of Namibia’s operations, Martin Davis yesterday said there was no need to panic over the changes.
Said Davis; "Marcia’s resignation is just standard. He is stepping back but is still the main shareholder. If it is about Frank Messa’s departure, it was a completely different story, he wanted to go home.  He is back in the USA now. Overally, we have confidence in our new CEO and the greatest news is that we have just acquired production capability with 13 000 barrels of oil per day in Brazil. It is a massive achievement. We are positive."