Australia Montara oil output hinges on Coogee sale

By Maryelle Demongeot

SINGAPORE, Oct 16 (Reuters) - The startup of the already delayed Montara oil project would hinge on the completion of the sale of the owner of the field, Australian independent oil and gas firm Coogee Resources, the company said on Thursday.

Its board initiated the sale process after Australian investment group Babcock and Brown Ltd BNB.AX decided to sell its 35 percent stake, prompting unsolicited interest for the entire unlisted company, Coogee said in a statement.

"The sale process is not expected to defer the Montara project, albeit its completion timing will depend to some extent on the successful buyer," a spokeswoman for the firm said by email.

Montara, which had been slated to start up by December but is already delayed till April, is expected to produce some 29,000 barrels per day (bpd) of light, low-sulhpur crude.

If it had started on schedule, it would have been the second-largest Australian field onstream this year, after the Woodside Petroleum (WPL.AX)-operated Vincent field.

Montara, in the Timor Sea off northern Australia has probable reserves of 39.9 million barrels of oil.

The delays, which have led to cost overruns, have been largely due to problems with a contractor, the spokeswoman said.

"Whilst additional funding has become more expensive for any company to secure in the current environment, it is not impossible to obtain. The overriding factor for the sale of the company has been prompted by Babcock & Brown's decision to sell its holding in Coogee Resources," she added.

Oilfield startups are prone to repetitive slips while the infrastructure needed to extract and transport the oil is put in place.

But further delays could mean lower returns as oil prices CLc1 have halved from July's near $150 record, leading to sharp falls in oil companies' values.

Investment firm Babcock and Brown saw its share stumble earlier this year on debt concerns, prompting the fund to restructure and sell some of its assets, including its 35 percent stake in Coogee.

Goldman Sachs JBWere has been appointed to conduct the sale, which is expected to be completed by end-November.

PROJECT FINANCING TIGHTENS

Small oil companies are facing increasing difficulty to fund projects, industry sources and analysts said.

"For a company that has no debt and now tries to raise new debt, it can be very difficult," said an Australia-based analyst who declined to be named.

"We are seeing quite a few companies trying to get bigger by merging and we are going to see more of that."

Coogee's sale plan came a day after another Australian independent, Nexus Energy Ltd (NXS.AX), said it would sell at least 30 percent of its Crux oil project after a potential buyer for a 25 percent stake withdrew because of the economic crisis.

"The purchaser stated that the decision not to proceed with the Memorandum of Understanding was due to the global financial crisis and not the result of a change in its views on the value of the asset," Nexus said in statement.

Nexus shares closed 24.2 percent lower on Thursday at A$0.375, steeper than the 6.7 percent drop on Australia's benchmark index .AXJO.

Coogee Resources, about 60 percent-owned by the Perth-based Martin family, also operates the Jabiru and Challis oilfields whose output has dwindled as the fields have matured. (Editing by Ramthan Hussain)