A private security guard stands in front of Glencore's office in Cham, Switzerland. Picture: REUTERS/ARND WIEGMANN
A private security guard stands in front of Glencore's office in Cham, Switzerland. Picture: REUTERS/ARND WIEGMANN

London — Mining and trading company Glencore has put its oilfields in Chad up for sale, three sources familiar with the matter said, in a retreat from its foray into oil production following asset writedowns over the past decade. 

Like its oil trading peers, Glencore expanded in the upstream sector about a decade ago in order to secure oil flows, but the value of the assets tumbled with the oil price slump in late 2014.

News of the Chad oilfields sale coincides with the retirement of Glencore head of oil Alex Beard at the end of June and the separation of its upstream oil interests from marketing.

The main producing fields are Mangara and Badila.

Glencore’s net oil production from the West African country accounted for more than half its net production at 7,700 barrels per day (bpd) out of a total net 12,700 bpd. By comparison, oil majors BP produces close to 4-million barrels of oil equivalent per day.

The sources said that Glencore put the assets up for sale less than a month ago and a data room including drilling and seismic details had recently been opened.

The sale is being jointly run by US bank Morgan Stanley and French bank Natixis.

A spokesperson for Glencore declined to comment. Morgan Stanley declined to comment and Natixis did not immediately comment.

Glencore was started by trader Marc Rich more than 40 years ago specialising in oil trading.

Over the past 20 years, it expanded into coal and metals mining but oil production constituted a small part of its business. Oil trading meanwhile grew to 5-million barrels per day, making Glencore the world’s second largest oil trader.

It entered Chad in 2012 by buying minority stakes in some licences owned by Calgary-based Caracal Energy and in 2014, the miner acquired the Chad-focused operator for $1.6bn.

Ill-timed venture

However, the purchase was ill-timed taking place just months before a major oil price slump and since 2015, Glencore has booked impairments of $1.9bn on its Chad assets after it scaled back its development programme and froze drilling between early 2016 and the second half of 2017.

In its 2018 report, Glencore said the recoverable value of its Chad assets was $1.2bn and gross production was about 10,500 barrels per day. In total, Glencore’s upstream gross production was 35,000 bpd.

Glencore has also booked impairments at its assets in Equatorial Guinea, though partially recovered, and in Cameroon. The company also holds an interest in Russian upstream company Russneft.

Reuters