Gunvor Buys Into Swedish Firm

(Reuters) – Trading house Gunvor has made its first big foray into oil exploration by agreeing to acquire a major stake in Swedish oil firm PA Resources, following in the footsteps of an asset accumulation drive by rivals such as Glencore.
PA Resources said in a statement that Gunvor, one of the world’s top oil traders, had committed to buy the bulk of the $136 million rights issue, allowing the oil trader to raise its stake in the firm to 49.9 percent from 10 percent previously.
Shares in PA Resources’ fell 34 percent following the announcement, in which the company also noted that it had been unable to refinance itself on the debt market, hence the rights issue.
Gunvor has long dominated trade of Russian oil but has significantly cut its exposure over the past year. It has bought coal assets in Russia and the United States, two refineries in Europe and built new storage capacity over the past few years.
In May, Gunvor said in its first bond prospectus it would beef up its assets ownership from Asia to Africa as opportunities for trading houses grow with oil majors shifting their focus to producing rather than refining or distributing.
Gunvor said in a statement its investment in the upstream sector through PA Resources furthers its strategy of diversifying along the energy supply chain.
Gunvor’s CEO Torbjorn Tornqvist said earlier this year he believed trading houses would have only selective opportunities in upstream – by taking risks which bigger companies cannot or do not want to take.
However, he said traders will never play any significant role in big explorations such as drilling in the Arctic.
PA Resources has exploration and production projects in Tunisia, Republic of Congo, Equatorial Guinea, United Kingdom, Denmark, Greenland, the Netherlands and Germany and had sales of approximately $330 million in 2012.
The company said it had to rely on Gunvor as the main underwriter of the rights issue as it has not yet regained confidence of investors to refinance itself on the debt market following weaker-than-expected development of Azurite field in the Republic of Congo.
“PA Resources has had a difficult time, but we believe is turning a page. Gunvor intends to lend our financial support, along with our expertise as a partner in the oil sector,” Tornqvist said on Wednesday.