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Korea National Oil mulls sale of Canadian assets: reports

A South Korean worker works at the loading/unloading bay of Korea National Oil Corporation's stockpile office in Kuri, east of Seoul, Sept. 7, 2005.


Korea National Oil Corp. is unhappy with the money-losing performance of its Canadian energy operations four years after buying them, but whether that means the state-owned company wants to sell all or part of them is unclear.

Two reports out of Seoul said KNOC is considering a sale of wholly owned Harvest Oil Operations Corp., which it acquired for $1.8-billion in 2009. It added to its holdings with a $525-million purchase of western Canadian assets from Hunt Oil in 2010.

"We've made an internal decision to sell the Canadian company as its losses become bigger amid lower oil prices in North America," The Financial Times quoted the company as saying. "We are also looking into other foreign assets and seeking various ways to dispose of unprofitable assets."

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According to a separate report by the energy news service Platts, an unnamed KNOC official said: "We are considering selling Harvest as part of efforts to improve financial conditions." The official added that the possible divestment was one of several options the company was weighing.

Harvest has oil and gas exploration and production operations in Alberta and Saskatchewan and an early-stage oil sands project. 2013 production is estimated at 53,000 barrels of oil equivalent a day.

It also runs the 115,000 barrel a day North Atlantic oil refinery at Come By Chance, Nfld., a plant that has had several owners over the years. It has been pressured by weak margins with its reliance on expensive imported crude oil.

Harvest's Calgary-based staff were surprised by the media reports, and were trying to "clarify" its parent company's position, spokeswoman Kari Sawatzky said.

Ms. Sawatzky said Harvest has several non-core Western Canadian oil and gas assets it is seeking to sell.

"We've been reassured that they are not selling Harvest, so it's probably more related to the non-core asset dispositions that we're actively working on," she said. The production volumes that would be sold with the assets are not large, she said.

In the second quarter, Harvest reported a net loss of $89.2-million, which was worse than the prior year loss of $73.5-million. It blamed a drop in output in its exploration and production division and lower sales and weaker product prices in refining and marketing.

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As for the refinery, which suffered a 73 per cent drop in gross margins in the quarter, Harvest is "actively looking at our opportunities," Ms. Sawatzky said.

She declined to say if a sale or some other transformation of the site are be among the options.

In June, Imperial Oil Ltd. said it will close its 95-year-old Dartmouth, N.S., refinery, and turn it into a distribution terminal, blaming a glut of refining capacity on both sides of the Atlantic and the high cost of imported crude. The Newfoundland plant faces the same market factors.

"We're always looking for ways to make our business more profitable, and the refinery's no exception," she said.

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