became the second London-listed mid-cap oil-and-gas company to attract a suitor in recent weeks after it said it is in talks with Indonesia’s Medco Energi
about a potential all-cash takeover bid which could create a southeast Asian upstream powerhouse.
The news sent shares in Ophir, which is focused on Asia and Africa, up by almost more than 32% on Wednesday, valuing the company at almost £334m. Medco, which didn’t disclose a value for the deal, has until January 28 to make a firm offer for Ophir or walk away for six months.
The talks come just weeks after Norwegian oil and gas group DNO, which owns a 29.9% stake in Faroe Petroleum
, launched a hostile bid for the remaining shares it doesn’t own in its London-listed rival.
Just hours before a Takeover Panel-imposed deadline for Faroe shareholders to accept DNO’s bid, Faroe said an independent report prepared by consultancy Gaffney, Cline & Associates concluded that the U.K. company was worth $879m to $1.08bn. That represents a 22% to 48% premium to DNO’s offer price of 152p a share.
DNO last week said its offer was “full and fair, even generous”.
Shares in Faroe were down 1.88% at £144.23p in early morning London trading on Wednesday, giving the company a market valuation of £537.83m.
Bankers and industry analysts expect more M&A activity in the oil and gas sector this year amid an ongoing recovery in the oil price which is currently trading at around $53.30 a barrel. J.P. Morgan expects Brent crude prices to average $73 a barrel in 2019.
Tom Ellacott, senior vice president at Wood Mackenzie said the temptation to relax the purse strings will grow if prices bounce back. “If oil prices return to US$70/bbl or above the cash windfall generated is huge and will inevitably drive sentiment back in favor of growth. It will also increase pressure to return surplus cash to shareholders,” Ellacott said.
If Medco’s bid for Ophir is successful, it would make the firm the seventh-largest non-NOC upstream producer in southeast Asia above Hess and BP
and just behind Repsol
, according to analysts at Wood Mackenzie.
Angus Rodger, research director at Wood Mackenzie, said the bid would substantially increase Medco’s regional footprint and diversify its mature, Indonesia-heavy portfolio.
“It would also bulk up its non-Asian exposure by adding growth options in Tanzania and Equatorial Guinea, to add to its existing positions in Libya, Oman, Yemen, Tunisia and the U.S.,” Rodger noted.
Russ Mould, investment director at AJ Bell, said Ophir had strived for years to develop the Fortuna natural gas discovery offshore Equatorial Guinea, “but hopes of developing the floating liquefied natural gas project have been beset by a lack of funding and a loss of key partners, including industry giant Schlumberger.”
Providing critical information for the U.S. trading day. Subscribe to MarketWatch’s free Need to Know newsletter. Sign up here.