Mergers and Acquisitions (mainly oil sector)

Thursday, May 14 2009 by

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: 

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 other words they reckon that Target was, at its recent lows, trading at only 21% of its true value. will be interesting to see how the defence gets on. [Edit 20/7/09: Successful defence - see ]

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 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].


Filed Under: Energy, Oil & Gas,


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720 Posts on this Thread show/hide all

Isaac 24th Apr '12 661 of 720

Cove Energy plc


* Further to the announcement of a possible offer by Shell Bidco for Cove on
22 February 2012, the boards of directors of Cove and Shell Bidco are
pleased to announce that they have reached agreement on the terms of a
recommended cash offer to be made by Shell Bidco for the entire issued and
to be issued share capital of Cove. Shell Bidco is an indirect wholly-owned
subsidiary of Shell incorporated in the Netherlands.

* Cove Shareholders who accept the Offer will be entitled to receive 220
pence in cash for each Cove Share.

* The Offer values the entire issued and to be issued share capital of Cove
at approximately £1,120 million and represents a premium of:

* 134 per cent. to the Closing Price of 94 pence per Cove Share as of 12
December 2011, the last Business Day prior to the date of the announcement
by Cove of its proposed sale of the Rovuma Area 1 Interest;

* 95.6 per cent. to the Closing Price of 112.5 pence per Cove Share as of 4
January 2012, the last Business Day prior to start of the Offer Period; and

* 42.4 per cent. to the Closing Price of 154.5 pence per Cove Share as of 21
February 2012, the last Business Day prior to the date of the Possible
Offer Announcement.

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emptyend 24th Apr '12 662 of 720

In reply to Isaac, post #661

Whilst there is a recommendation from the board, and a commitment of their shares....and there is an £11mn break fee....that may not be quite the end of the matter. The door is still ajar for PTTEP, even though Shell have matched their offer and got a recommendation:

Other potential offerors can still nonetheless announce competing offers for Cove.

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Isaac 23rd May '12 663 of 720

PTT Exploration & Prod PublicCo Ltd

Outbids Shells 220p
Under the terms of the Acquisition, Cove Shareholders who accept the Offer will be entitled to receive:

o for each Cove Share held, 240 pence in cash.

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emptyend 23rd May '12 664 of 720

In reply to Isaac, post #663

I notice that the shares are once again trading at a premium to the offer....247.5p currently.

It seems to me that Shell have been very cautious in their approach here - excessively cautious, in fact ..... given the obvious likelihood of a bidding war. They may have done better to try to deter a Thai bid in the first place, by showing rather more serious intent!?

Of course they may also be playing a canny game, and planning to cap the Thai bid with 270p+ - figuring the Thais won't pay near £3. But at some point the music will stop for sure. At 240p (+tax paid) the shares are already close to where I thought a deal would be done (equivalent to c 270p)....though of course there have been further material discoveries since then.

Interesting times for Cove holders.


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djpreston 28th May '12 665 of 720

And who would have ever guessed it?

Tom Cross' PArkmead Parkmead (LON:PMG). has gone and bought Deo Petroleum (LON:DEO) for 2 PMG shares for 1 DEO.

Good eal for TC but a lousy one for DEO (unless you view the paper as worth having to give you an upside exposure.

Fund Management: European Wealth
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djpreston 28th May '12 666 of 720

Sorry if that post looks odd. For some reason, even without clicking the text editor, it woudlnt work correctly.

Fund Management: European Wealth
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emptyend 28th May '12 667 of 720

In reply to djpreston, post #665

Can't argue with that - though the announcement so late in the day (why?) seems to have precluded investors getting their heads around the deal.

Presumably some kind analysts will give a steer in the morning....

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djpreston 28th May '12 668 of 720

Well pmg way over Nav but the deo deal is well below Mac so I suppose you can say it sort of balances out..

Fund Management: European Wealth
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Isaac 1st Jul '12 669 of 720

Heritage Oil to buy £541m Nigerian oil assets from Shell
Heritage Oil has agreed to buy a parcel of Nigerian assets from Royal Dutch Shell and its partners for $850m (£541m), as it seeks to build a major presence in the country.

The FTSE 250 company, led by chief executive Tony Buckingham, has formed a Nigerian joint-venture called Shoreline to buy a 45pc stake in a major onshore oil producing block known as OML 30. Shell owned 30pc of the block, with Total and ENI as minority partners. The majority 55pc stake is held by the Nigerian National Petroleum Corporation.

The deal, Heritage’s first foray into the country, will significantly increase its production, from 605 barrels of oil per day (bpd) currently to 11,354bpd. Heritage’s management believes production can be increased further.

The pending acquisition will also represent a more than three-fold increase in Heritage’s proven and probable reserves, to 278m barrels.

Mr Buckingham said the deal would be “transformational” for Heritage.

The deal will be funded through a $550m bridge finance loan from Standard Bank, and a subsequent $370m rights issue. The transaction is classified as a reverse takeover under listing rules, as Heritage’s market value on Friday night was £318m, and as such will need shareholder approval.

A bit annoyed the acquisition will be funded by RI given a consiuderable amount of cash was spent nuying back shares much higher up.




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Isaac 1st Jul '12 670 of 720

Oil and gas are the new African queens

“In the space of a few years, East Africa has become a feeding ground for most of the world’s oil majors, which have sniffed our resources of oil and gas on a truly gargantuan scale,” wrote Malcolm Graham-Wood, oil analyst at VSA Capital, in a recent note. And in the world of oil and gas where, as he puts it, “if you find it, they will come”, those gargantuan reserves are the key.

“It’s been known there’s oil here for 100 years,” Laurie Hunter, chief executive of explorer Madagascar Oil says. “It actually seeps out on the surface in places.”

This is an interesting read :


Imagine what could happen in Tajikstan if Tethy's (TPL) strike next year. The majors are not interested at the moment, but they will be if their is a big strike of HC, TPL own the most prolific acreage in the area.



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Isaac 1st Jul '12 671 of 720

More details on the Heritage acqusition

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davjo 1st Jul '12 672 of 720

The deal will be funded through a $550m bridge finance loan from Standard Bank, and a subsequent $370m rights issue.

Well that's a bit of a joke, given HOIL have over the last year bought back over 10% of the company at double the current SP. Nonetheless, this does look an interesting least until the Circular reveals who is paying for what exactly. I wonder if HOIL have had the nod over the Uganda arbitration in their favour? That would go down exceedingly well if so!

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emptyend 6th Jul '12 673 of 720

In reply to emptyend, post #664

Very interesting piece here in Businessweek, especially for holders of Cove Energy (LON:COV)

Traders are more convinced than ever that a bidding war for Cove Energy Plc (COV) will lead to the richest takeover premium on record for an oil and natural-gas explorer.

Of course this comment is glossing over the fact that Cove have made some fresh large discoveries whilst the process has been under way. The article goes on to give various guesses on price and the way the bid will develop from here - numbers up to 330p (132% premium) are suggested.

From memory, the highest premium I can recall for an E&P in the last 15 years was about 8 years ago when a smallish Norwegian explorer went for a premium of just over 140%. Can't recall the name - but the details are buried on TMF somewhere.

Of note, re the scale of the Cove Energy (LON:COV) assets is this comment:

While Cove has yet to generate revenue, the London-based company owns an 8.5 percent stake in Mozambique’s Rovuma Area 1, where recoverable natural gas amounting to more than six times the U.K.’s existing reserves has been discovered.

......and of course next door offshore ENI's block holds a similar amount.

I think the next move(s) can be expected in the next week or so.



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StrollingMolby 7th Jul '12 674 of 720

In reply to emptyend, post #673

From memory, the highest premium I can recall for an E&P in the last 15 years was about 8 years ago when a smallish Norwegian explorer went for a premium of just over 140%. Can't recall the name - but the details are buried on TMF somewhere.

Is this the one you were thinking of?

28/10/08 - German oil and gas company Wintershall has agreed to buy Norway's Revus Energy for $740 million in a bid at a premium of 145 percent to Revus' closing price on Friday, the companies said on Monday.

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StrollingMolby 7th Jul '12 675 of 720

Doh! Just noticed you said eight years ago - though similar bid premium to Revus above...

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emptyend 8th Jul '12 676 of 720

In reply to StrollingMolby, post #674

Yes that was one - I'd misremembered the timing. Worked out well for Wintershall too....

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fuiseog 12th Jul '12 677 of 720

Premier 60% farm-in to Rockhoppers Falklands licence.

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REO100 13th Jul '12 678 of 720

As ee highlighted earlier, looks like it might get interesting at Cove Energy - auction time.


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emptyend 16th Jul '12 679 of 720

Alphaville today:

….. Have we fired off the raw warning already?
Yes. It appears we have.
fire aagain
Well. This is saw raw it’s barely even carpaccio …..
But there’s been some talk in recent days of an Asia to Europe bid.
Of decent size. £1bn or ballpark.
anything specific
No. That’s the problem. People thinking commodities.
For oil in that kind of size, there are only a few potential targets in the UK at least.
do you think this firm..or just somethjing that could have been said anytime in the last six months
I think this is firm. Not just waffle. I’d not be surprised to see something in the next few days.
And that makes me very nervous about Salamander.
Which has been strong for some time, for no obvious reason.
Salamander Energy PLC (SMDR:LSE): Last: 191.50, up 12.4 (+6.92%), High: 192.30, Low: 178.00, Volume: 232.25k
To be clear, I don’t know if it’s a target. But it could be. It fits the bill.
As I say, that’s not raw. It’s just typing really, and I’m not sure I want to type much more.

....eventually they will find a more obvious candidate, I guess - though perhaps not if they limit their thoughts to £1bn?

Thats what can happen when you put words into your source's mouth, I imagine  ;-)


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emptyend 16th Jul '12 680 of 720

Now that Royal Dutch Shell (LON:RDSA) have dropped out of the bidding for Cove Energy (LON:COV) (presumably handing PTTEP a free run), it will be interesting to see what they do next. I doubt we have long to wait to find out.

One presumes that they must have other irons in the fire (perhaps taking some of Anadarko's stake or some of ENI's in the other Moz block?)......they were never going to stop at Cove Energy (LON:COV) 's 8.5% anyway and paying up would probably have moved the price against them in relation to a larger deal with one of the others.


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