State-owned Heritage Petroleum has said it plans to sell scrap iron as part of its strategy to raise cash amidst the crash of oil prices.
In a release the company said it had identified additional cash-generating options ‘such as the sale of obsolete assets including scrap iron and supply boats which we expect will yield significant revenue’.
The company admitted that this is an unprecedented time for Trinidad and Tobago, the world and the global oil industry and Heritage Petroleum Company Limited has not been insulated from all that is occurring.
As a result it is also in discussions with its creditors on new financing arrangement for the billion dollar debt that it is repaying on behalf of Petrotrin.
The company in release said it was having: “Discussions and negotiations with financial institutions on financing arrangements and loan repayments arising out of legacy Petrotrin debt obligations.”
Heritage has also negotiated significant savings with Energy Service Companies which have reduced their rates aggressively.
“These measures have resulted in a capital expenditure reduction of 49% and an operating expenditure reduction of 21% in the revised Heritage budget which will be constantly reviewed.” the company noted.
It has also placed a freeze on recruitment, save for critical jobs and these measures are expected to continue for the rest of the 2020 fiscal year.
Faced with a precipitous fall in crude prices Heritage has also decided to store its oil rather than sell it at record low prices .
This means the company will for the time being stop exporting oil.
Heritage confirmed it has the ability to store its present production for up to two and a half months and sources say it would prefer wait it out, hoping for better prices, rather than effectively give away its oil.
Oil futures have crashed and crude is selling at less than zero dollars a barrel, the lowest in history as the US has run out of storage and oil producers now have to pay people to take their crude,
It costs Heritage US$25 to produce a barrel of oil according to Energy Minister Franklin Khan who recently made the revelation on CNC3’s business show.
The company said it has been producing 41,000 barrels of oil per day and it has storage capacity to hold three and a half million barrels.
As a result it will not be exporting and the company will rely on its cash on hand to pay its bills.
Oil prices have crashed as demand has plummeted due to the COVID-19 pandemic.
Multiple sources at Heritage tell GML that the hope is that demand will pick up in the next sixty days, and with it global prices, as world economies start to reopen.
Heritage usually receives the price traded for West Texas Intermediate plus US $5 a barrel.