Ramnarine queries 3-way Petrotrin split

Namely, “How will the balance sheet be apportioned between those three companies? What are the implications for future re-financing of the US $850 million bond? What are the implications for the pension plan; how will it be separated?” Ramnarine also wanted the person/ s who recommended the split to explain how Petrotrin’s current liabilities would be divided amongst the three new entities.

“As at 2016, the company’s current liabilities were $12.2 billion, with total liabilities of $28.2 billion.” Noting that a current liability “could be something which you have to pay quickly while a non-current liability (includes) de-commissioning costs, money set aside for persons who are retiring and so on,” Ramnarine asked, “How is that ($12.2 billion) going to be apportioned across three companies?” Ramnarine shared his concerns on Thursday evening, while delivering the feature address at a technical talk on the “Future of TT’s Petroleum Industry: Challenges and Opportunities”, held at the University of the West Indies, St Augustine. Rather than split it into three, Ramnarine advocated Petrotrin should maintain its integrated structure but with reduced operating costs and increased oil production.

“According to Rex Tillerson, former chairman and CEO of Exxon- Mobil, now US Secretary of State, integrated oil companies allow for greater degrees of flexibility (because) they can adapt quickly to the changing needs of customers. It also allows for shared services across the organisation, such as information technology, human resources and legal services.” Ramnarine argued that, “without the integrated approach at Petrotrin, you would have the triplication of services; resulting in increased costs, inconsistent policy, confusion in strategic direction and so on.

That, of course, means increased head count. And finally, corporate planning and allocation of scarce resources, including funding and investment, is inefficient if you have three separate companies.” Looking ahead, Ramnarine recommended five key things be done, if Petrotrin is to return to profit: 1) Keep the integrated structure intact; 2) Manage cost downward and cut waste and inefficiency; 3) Focus on increasing production; 4) Increase the joint venture, lease operator farm out (LOFO), incremental production service contract (IPSC) programme – “this has been proven to work since 1989”; 5) Focus private capital on drilling and Petrotrin capital focus on asset integrity and paying debt; and 6) Re-finance the US$850 million bond “as soon as possible.” Regarding the bond, Ramnarine warned that this may prove “difficult to refinance with three separate companies because an integrated company has more clout when it sits before a bank.” The technical talk at which Ramnarine spoke was hosted by the American Association of Petroleum Geologists (AAPG) ,Young Professionals of TT Chapter and AAPG UWI STA Student Chapter, in collaboration with the Society of Petroleum Engineers (SPE) TT Young Professionals Chapter and SPE UTT Student Chapter.