Mergers and Acquisitions (mainly oil sector)

Thursday, May 14 2009 by
35

I've set up this thread as a "home" for any live topics relating to M&A in the Oil sector.

With virtually every stock in the sector continuing to trade well below estimated NAVs, there will be frequent bid situations emerging. Some of these will be agreed bids but, in the present climate, unsolicited bids are also highly likely.

I'm starting the ball rolling with a link to an Australian bid situation, in which the target company (called Target Energy, funnily enough) is rebutting a hostile bidder in typically strong Aussie terms: http://newsstore.theage.com.au/apps/previewDocument.ac?docID=GCA00953206TEX&f=pdf 

The link may take some time to download - it is to a 162 page document giving chapter and verse on why Target recommend rejection of a bid that they (and their professional advisers) consider values Target at around HALF its true value. The relevance of the link is that the Grant Thornton section of the document demonstrates a range of different ways of trying to value an E&P company and is therefore of some generic interest to people who own shares in future bid targets.

Target's shares recently hit a low of 2.5 cents before the bid was tabled in mid-April. They are now 5 cents. Grant Thornton (acting for Target) reckon the bid is worth around 6.35c, whereas they think Target is actually worth around 11.9c per share......in other words they reckon that Target was, at its recent lows, trading at only 21% of its true value. So........it will be interesting to see how the defence gets on. [Edit 20/7/09: Successful defence - see http://www.stockopedia.com/forum/view/28067/ma?comment=121#121 ]

What is also interesting from the perspective of a UK holder is that the non-exec Chairman of Target, Didier Mercia, is also a director of Aminex. Holder of Aminex will know that they are another company that has US assets (like Target) that are being substantially undervalued by the market at present.....so it is nice to see Aminex getting a bit of first-hand experience before the predators arrive, in turn, at their door!  ;-0

Feel free to add any other bid situations of interest to this thread. [Edit: Do not, however, use it to speculate endlessly about the bid prospects for specific companies, especially where there is little likelihood of M&A news in the near future. Contributions which digress from matters of general sector interest are liable to be removed].

ee


Filed Under: Energy, Oil & Gas Producers,

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720 Posts on this Thread show/hide all

Fangorn 24th Feb '12 641 of 720
2

In reply to emptyend, post #640

I suspect as much. Just get the feeling that the we are at the calm before the storm stage (the storm being where we get a succession of companies suddenly put in play, with bids and counter bids materialising).
Oil rising adding fuel to the fire it seems.

It does indeed look as if Soco's days could be finally numbered in the near future. Along with a handful of other names(Ophir, NPE etc)

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oilretire 25th Feb '12 642 of 720
2

Dana (via KNOC of course) increasing stake in Bittern. Not quite a 'major' field as the writer states IMHO.

http://www.heraldscotland.com/business/company-news/dana-petroleum-raises-stake-in-north-sea-field.16838007

The company has agreed to buy the 28.3% stake in the Bittern field owned by America's Hess Corporation, increasing its share of the asset to 33%. The terms of the deal were not disclosed.

It is thought Dana Petroleum may have agreed to pay Hess more than $200 million (£125m) for the stake.

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oilretire 25th Feb '12 643 of 720
3

In reply to oilretire, post #637

El Paso deal agreed for $7.15 billion

http://www.worldoil.com/El_Paso_to_sell_exploration_and_production_business_to_private_equity_firms.html

Didn't realise they were close to break up. Not sure what it all means for progress (or lack of) with AEX.

Can't copy text out of the link for some reason.

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djpreston 26th Feb '12 644 of 720
1

I'm not at all surprised that the ep assets have gone. It was never km's intention to keep them. Probably explains a bit of foot dragging by them last year though.

Fund Management: European Wealth
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emptyend 27th Feb '12 645 of 720
3

More M&A speculation from analysts being reported - this time focusing on Ophir.

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emptyend 28th Feb '12 646 of 720
2

In reply to emptyend, post #640

Re Cove Energy (LON:COV) and my earlier comment that:

This could be a three or four way contest by the middle of next week, I guess......

The Indian press has an interesting comment this morning:

State-owned oil majors ONGC and GAIL plan to outbid Royal Dutch Shell and Thailand's PTTEP with a $2-billion offer for UK's Cove Energy, which has been put on the block.

Cove Energy has exploration and development assets in Africa. The combined bid of the Indian firms may value the London-listed firm at 245 pence, which is 11% more than the Thai rival's offer and at an almost 20% premium to the Shell bid. OVL, ONGC's overseas arm, and GAIL may place the offer as early as this week after necessary approvals from the Indian government, said sources familiar with the matter.

I don't see 245p cutting the mustard either. Ultimately it'll need 275p+ IMO.

ee

ps...Cove Energy (LON:COV) shares up 9p this morning to 245p on the back of this

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Fangorn 28th Feb '12 647 of 720
2

Bowleven takeover talks with Dragon Oil off - no offer forthcoming it seems.

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flyinghorse 1st Mar '12 648 of 720
2

Ithaca release today stating unsolicited interest from a number of third parties:
http://online.hemscottir.com/ir/iae/news_xml.jsp?item=931896234100029

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chriswalden 1st Mar '12 649 of 720
1

ee,

I don't see 245p cutting the mustard either. Ultimately it'll need 275p+ IMO.

The elephant in the rovuma might be the Mozambique Gov't, which has to give consent for the transfer to the successful bidder.  From the Shell 195p proposed offer RNS:

The making of an announcement of a firm intention to make the Proposed Offer by Shell Bidco (the "Firm Intention Announcement") is subject to, and conditional upon, the receipt of written consent of the Republic of Mozambique's Minister of Mineral Resources (or through one or more delegated representatives) as required under Article 24.1 of the Exploration and Production Concession Contract relating to Cove's 8.5 per cent participating interest in the Mozambique Rovuma Offshore Area 1 Block (the "Rovuma Area 1 Interest"), such consent to be in a form satisfactory to Shell Bidco (the "Mozambique Consent").

http://www.investegate.co.uk/Article.aspx?id=201202220704198768X

Cove also stated that, were Shell to make a firm offer at 195p, it would expect to recommend it to shareholders.

I know nothing at all useful about this sort of situation, but Shell would appear to be the preferred acquiror from MozGov's point of view, so does Shell have to match or exceed the other two proposers of offers, if indeed they make them firm offers?

Is there an "ethical" precedent in a situation like this?

 

 

 

 

 




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emptyend 1st Mar '12 650 of 720
1

In reply to chriswalden, post #649

 Cove also stated that, were Shell to make a firm offer at 195p, it would expect to recommend it to shareholders.

That is the way that many have construed their comment, but the reality is a bit more nuanced, IMO:

The Board of Cove believes that the level and nature of the Proposed Offer are such that it is in its shareholders' interests to progress matters with Shell Bidco to the point where such an offer can be made. Accordingly, the Board of Cove would expect to recommend the Proposed Offer of 195 pence in cash per Cove share, if made. It has been agreed that, if the Board of Cove does so recommend the Proposed Offer of 195 pence in cash per Cove share, each director of Cove will provide a hard irrevocable undertaking to accept the offer in respect of his own entire beneficial holdings of Cove shares and those of his family members and related trusts.

With PTTEP on the table at 220p, I don't see any way at all that the Cove board can recommend Shell at 195p (unless PTTEP are vetoed by the Governrnent).

IMO the Mozambique Government are likely to be equally happy with PTTEP or Shell....which is why I think it will come down to price and how much the bidders want the assets.

ee

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chriswalden 1st Mar '12 651 of 720
1

With PTTEP on the table at 220p, I don't see any way at all that the Cove board can recommend Shell at 195p (unless PTTEP are vetoed by the Governrnent).

The MozGov earns nothing from the transfer whatever price Cove is sold for, so its main consideration must be the quality of the new partner, both in terms of financial strength and project execution, particularly since that partner won't be stopping at 8.5%. In all probability, Shell could end up becoming the largest equity holder in the LNG development. I'm not so sure  PTTEP or the Indians could match that degree of financial commitment.

 

 

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emptyend 1st Mar '12 652 of 720

In reply to chriswalden, post #651

The MozGov earns nothing from the transfer whatever price Cove is sold for, so its main consideration must be the quality of the new partner, both in terms of financial strength and project execution, particularly since that partner won't be stopping at 8.5%. In all probability, Shell could end up becoming the largest equity holder in the LNG development. I'm not so sure  PTTEP or the Indians could match that degree of financial commitment.

Yes of course. But I am just saying that, in the context of the political nature of the decision and international relations, I think that PTTEP is likely to be at least as acceptable as Shell (especially since the stakes on this deal are only 8.5% - whether Shell have grander ambitions is completely by the by for now). I'm less sure though how some of the other possible bidders would be viewed.

My point about Cove being unable to recommend Shell at 195p is more a reflection of their fiduciary duty to their shareholders than anything else.

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djpreston 1st Mar '12 653 of 720

The MozGov earns nothing from the transfer whatever price Cove is sold for,

From newswires

BFW 03/01 16:11 Mozambique Plans to Tax Cove Energy Share Sale, Minister Says BN 03/01 16:04 *MOZAMBIQUE RESOURCES MINISTER ESPERANCA BIAS COMMENTS IN MAPUTO BN 03/01 16:04 *MOZAMBIQUE WILL ADVISE COVE ON TAX WHEN DEAL CONCLUDED: BIAS BN 03/01 16:04 *MOZABIQUE `STILL WORKING ON HOW MUCH TAX' WOULD BE PAID: BIAS BN 03/01 16:04 *MOZAMBIQUE PLANS TO TAX COVE ENERGY SHARE SALE, MINISTER SAYS

Fund Management: European Wealth
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emptyend 1st Mar '12 654 of 720
1

In reply to djpreston, post #653

Not a particularly accurate piece of reporting to say that they "plan to tax" Cove's share sale, as far as I can tell from Reuters:

"We are monitoring the negotiations and what we have said is that we are going to put in place a capital gains tax," Esperanca Bias told journalists.

So...no basis for such a tax exists at present - and I'd struggle to see how they are going to frame a tax on transactions take place abroad and which almost certainly does not affect the ownership of ANY Mozambique company or the profits of any of its citizens (except any shareholders in Cove who happen to reside there).

In the improbable event that they can frame a tax which retrospectively taxes transactions between foreign owners of assets in Mozambique, I'd expect Anadarko, ENI and others to be taking careful note.

Of course one can understand the temptation for the minister - but she would surely be best advised to let all the investment take place in Mozambique and take in tax what would doubtless be a decent slice of the income generated therefrom. Yes that would be a few years down the road, but it must surely be better to wait than to risk diverting investment - and some of the best economic opportunities the country has ever seen.

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emptyend 2nd Mar '12 655 of 720
1

In reply to emptyend, post #654

RNS from Cove this morning, saying that they are "seeking clarity" on the tax reports.

That isn't surprising - and I'd expect the eventual legal position to be as laid out in my previous post. However, investors who are concerned about the timeline for obtaining such "clarity" would perhaps do well to remember that "Mozambique time" in the relevant ministries may not take account of the pressures of M&A timetables etc. From that perspective (rather than my strictly legal points), those who took the money and ran yesterday (such as djp, from reports elsewhere ;-)), may prove to have been prudent. We may find out rather sooner than the tax questions resolve.

Meanwhile, Shell (and PTTEP) are doubtless keeping their powder dry and their ears to the political ground. I'd guess that both have room to increase, if the Government doesn't try/manage to take a slice.

ee

ps.....of course this sort of potential for tax/interference may well be precisely why the Cove board wanted Shell to put a formal offer on the table. Very much better to flush such issues out at an early stage than to have to amend a deal later on (Cove currently down 15p at 210p at 8.10 am)

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emptyend 10th Apr '12 656 of 720

In reply to emptyend, post #655

Cove RNS this morning, clarifying the Mozambique tax plans. Probably a better "worst case" scenario than some had assumed - and the market seems back on track and looking for the bidders to raise their indicative offers.

ee

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MadDutch 10th Apr '12 657 of 720

Sharescope has Soco at 284p this evening.

Is there any hint that share buybacks will resume?

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emptyend 10th Apr '12 658 of 720

In reply to MadDutch, post #657

No.

There have been no buybacks since 31st Jan - which was the last time the share price was at this level.

There are several possible explanations - but only one of them would be on topic for this thread, so if you want to consider other angles or just talk about buybacks, please use another thread.

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MadDutch 11th Apr '12 659 of 720

In reply to emptyend, post #658

ee, This subdivision of Soco into a multitude of specific threads is confusing. Very easy to miss posts.

Frankly, the Motley Fool filing system for posts is a lot more user friendly. Very hard to miss posts.

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emptyend 11th Apr '12 660 of 720

In reply to MadDutch, post #659

If you read the header, MD, you will see this isn't a SOCO thread at all

I've set up this thread as a "home" for any live topics relating to M&A in the Oil sector.

- hence my comment redirecting you! You have just posted on a sector board!

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