NOPC / Rally Energy Group

The National Oil Production Company (NOPC) is a Cairo-based upstream oil and gas exploration and production company. In 2007, NOPC acquired 100% of Canada’s Calgary-based Rally Energy for US$ 868 million. Rally has a 100% operating interest in the Issaran heavy oil field, an onshore asset in the Gulf of Suez, Egypt. Rally also holds a 30% stake in the Safed Koh block in Pakistan’s Punjab Province, where it is participating in the development of a natural gas discovery. NOPC / Rally is a Citadel Capital Platform Company with a paid-up capital of US$ 626 million.

OPERATIONAL HISTORY

Since acquiring Rally Energy, Citadel Capital has recruited a management team in NOPC / Rally that has tripled the reserves base and uncovered a substantial volume of Original Oil in Place (last estimated at c. 2.5 Billion BBLS) of the asset. However NOPC / Rally had faced technical and operational difficulties in developing the production of its Issaran field to levels assumed under both the debt and equity cases envisaged at the time of the acquisition of Rally Energy. This has rendered a situation where the NOPC / Rally group is over leveraged under its current production performance.

NOPC / Rally’s management has identified a development plan for the Issaran field designed to increase and sustain production while piloting various oil recovery techniques in multiple locations in the field. When proven successful the development plan will be rolled out to achieve sustainable increased levels of production from the current producing areas. This will in turn enhance field value and could be later applied to the untapped Western and Eastern flanks of the Issaran field achieving further enhancements in value. In the meantime, NOPC is focusing on discussions with its lenders around ways to manage its debt position and achieve a more balanced leverage position for the group.

CITADEL CAPITAL WRITE DOWN

Citadel Capital has made the decision to mark down its equity and debt investments in NOPC / Rally group to a value of zero for prudence purposes as NOPC / Rally is currently having difficulties in managing its debt burden and the current marketable value LHL’s asset is estimated at less than the total value of the senior and mezzanine facilities. Citadel Capital will revise its valuation of its NOPC / Rally group equity and debt investments if significant success in both debt discussions and field development is achieved.