Dominion Petroleum (LON:DPL) became the latest small cap exploration company to be picked off this week by a larger peer. The share performance of pure exploration companies on AIM has been hit particularly hard by the drop in sentiment since April 2011 and even with a premium over the day prior price of 64%, investors who only entered into Dominion Petroleum during the first four months of the year will be nursing losses from this deal. The consideration by the acquirer, Ophir Energy amounts to $173 million including cash held by Dominion Petroleum for 4 million acres of exploration land primarily in East Africa.
Assessing the true value of Dominion Petroleum is a largely subjective exercise due to a the low level of capital on the balance sheet and the lack of a discovery within the company’s asset portfolio. The prospects for a booming gas industry in the East of Africa look promising however following three gas discoveries in Tanzania from Ophir Energy alone and a potential 10TCF of gas discoveries offshore Mozambique by Anadarko. The main assets of Dominion are composed of exploration blocks offshore Tanzania, one of which only a fortnight ago attracted a $22 million farm in from Mubadela Corp for a 20% interest.
Sinopec added to China’s Canadian asset grab this week through a $2.9 billion (including debt) takeover of Daylight Energy, Inc. Sinopec achieved a recommendation from the board of Daylight by offering C$10.08 per share, representing a huge premium over the $4.59 that Daylight Energy were trading at one day prior to the offer. In Daylight Energy they will receive a company 67% weighted towards gas and with the majority of reserves already developed. Daylight also offers additional upside in their land holdings in the Montney shale play and the company’s recently disclosed 130,000 acre land position in the rapidly emerging Duvernay shale play. The acquisition metrics after the exploration upside and tax pools have been considered equates to under $18 per proven boe of reserves.
The move follows a similar pattern to other Asian NOC’s keen to utilize the developing LNG export capabilities on the west coast of Canada. The timing of the deal coincided with the Kitimat LNG terminal partners, Apache, EOG and Encana receiving an export license this week, paving the way for 1.2 bcf/d of gas to be shipped from Canada…
