Japan Oil Development Co. will file for court protection from creditors under the fast-track Civil Rehabilitation Law, with an estimated debt of more than 400 billion yen, sources said Tuesday.
Japan Oil Development was scheduled to convene a board meeting Wednesday and apply for the legal action with the Tokyo District Court later in the day, the sources said.
With no prospect for business improvement, the nation’s largest oil development company, which operates under the umbrella of the government-affiliated Japan National Oil Corp., has abandoned efforts to rebuild its operations on its own, the sources said.
After reducing its debt, the company is expected to integrate its operations with Inpex Corp. and Sakhalin Oil Development Cooperation Co.
Japan Oil Development owns a 12 percent concession on five oil fields off the coast of Abu Dhabi.
The company ships 200,000 barrels of crude a day to Japan. The amount of oil developed by the company is equivalent to 5 percent of Japan’s overall oil imports.
Established in 1973, the company is capitalized at 365.2 billion yen. Japan National Oil holds a 90 percent stake in the firm. The rest is owned by nine private-sector companies, including Overseas Petroleum Corp. and Mitsui Oil Exploration Co.
Japan Oil Development posted a net profit of 11.4 billion yen on revenues of 242.8 billion yen for the business year that ended Dec. 31. But its financial standing has been deteriorating due to the huge investment for acquiring the concession as well as interest payments on heavy borrowings.
With no prospects in sight of repaying its debt, the company is expected to see its net profit plunge 90 percent in 2006 and beyond, affected by revisions to the contract terms covering the Upper Zakum oil field, the company’s largest profit source among the five fields.
Based on the Civil Rehabilitation Law, Japan Oil Development plans to carry out a 100 percent capital reduction. The company is expected to be made into a wholly owned subsidiary of Japan National Oil after conducting a debt-for-equity swap for loan claims held by Japan National Oil, the sources said.
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