EnCore Oil Agrees Sale To Premier Oil For £221 Million

5th Oct '11 by Stockopedia News

8 comments 10862 reads

North Sea exploration company EnCore Oil (LON:EO.) is being acquired by FTSE 250 group Premier Oil (LON:PMO) for £221 million. The 70p per share offer, which has been recommended by the EnCore board, will give shareholders the option to accept cash or new shares in Premier. Yesterday, shares in EnCore fell by over 8 percent to 45.25p but soared in early trading this morning to 72.5p, suggesting that some in the City think the agreed price is too low.

For Premier, the deal offers the chance to boost its stake in the Catcher field from 15 percent to 50 percent, together with the operatorship of what is one of the largest discoveries in the UK North Sea in recent years. The deal will also add a 16.6 percent interest in the Cladhan discovery. Together, those discoveries will add an extra estimated 17 million barrels of discovered oil reserves and resources from wells drilled to date. Premier will also benefit from EnCore’s strong exploration assets with the addition of the Coaster prospect east of Catcher (100 percent) and the Tudor Rose (40 percent) and Spaniards (28 percent) prospects close to Premier’s existing Scott area facilities.

Alan Booth, the chief executive of EnCore, said: “The acquisition de-risks EnCore’s development portfolio of assets, providing EnCore shareholders with an opportunity to crystallise the value created through EnCore’s highly successful exploration track record. The acquisition is in line with EnCore’s long stated strategy, and also gives EnCore shareholders the option of retaining exposure to EnCore’s assets within the enlarged portfolio via the share alternative.” In an interview with Stockopedia earlier this year, Alan Booth stressed the importance crystallising the value of assets at the right time for shareholders.

Simon Lockett, the chief executive of Premier, added: “This is a perfect fit for Premier given our existing North Sea assets. Operatorship of and the increased equity position in Catcher will help us to progress this development in line with our timeframe and maintain momentum across our portfolio. In addition to existing discoveries, this acquisition will also add a number of exploration prospects to our 2011 and 2012 exploration programme. We continue to prove through opportunities such as this that we can move quickly to add future production, reserves and resources to our portfolio.”

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kincora

5th Oct '11

Surprised and disappointed at the priceagreed

jseth123

I, like many others (it seems), sold out this morning at ~72p. I didn't want to be a PMO shareholder before and I don't want to be one now.

Unlike kincora, I think it's a reasonable price and was happy to take it (although my average buying price was 45p!) I trust AB to have done the best thing by his shareholders and I think it must have been clear to him that any further fundraising would have been hideously dilutive.

I also don't think we'll see any rival bids.

MrTrousers

24th Oct '11

Apologies if this is a dumb question but does taking PMO paper assist with managing CGT? I would have thought that such an exchange would be treated as a sale of EO shares and then purchase of PMO shares i.e. crystallising any profit on the EO shares.

MT

loglorry

no cgt if you take the paper i.e. the gain/loss is not realised. The EO directors are taking PMO paper which is probably to avoid CGT. PMO does not pay a dividend though so if you want the gain/loss you'd have to sell in the market now or PMO later.

What is taken as the purchase cost of the PMO shares? Is the EO gain carried over or does it "start afresh" from the date of getting PMO shares?

Cheers

I'm pretty sure that if for example you sell your PMO shares for the equivalent of say 110p (after applying the conversion rates from EO to PMO shares) you'll then get taxed on the effective gain/loss of what you paid for EO deducted from 110p. So if you paid 20p for your EO shares and you sell PMO for 110p (equivalent) you'll pay tax on 90p of profit.

You can move your PMO shares into an ISA over time if your EO shares are not there already protecting against CGT thereafter and realising a gain each time you move them in. You can use up your Capital gains allowance htat way but depending on how many you have this might take some time.

Log

No free lunch then! No surprises(!).

Answer here too (after some searching): www.hmrc.gov.uk/helpsheets/hs285.pdf

djpreston

25th Oct '11

Not sure if jseth's link gives the answer, won't load for me for some reason (prob Blackberry display prob).

Anyway, its basically a hold over of the gain, the PMO shares are deemed to be acquired at the same time/cost as the EO. shares.

However, if there's a cash element as well then things get complicated.
What you need to do now (if a cash element) is to apportion the cost of the EO shares to both the cash and shares "pots". You do this by taking the First Day Price (of the new PMO shares) and working out the value of the "share" pot. Add this to the cash you've received and you've got the denominator for the proportion with the numerator being the market value of the shares (FDP based) or cash. Multiply by the cost and you've got the comparable cost for each pot.

HTH

Darron

EnCore Oil agrees sale to Premier Oil for £221 million

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