Deals Monitor

Ophir Energy in takeover talks with Indonesia?s Medco

Shares in Ophir Energy rose by as much as 35% after it emerged the company was the target of takeover talks with Indonesian oil and gas group Medco Energi. A tie-up between FTSE-listed Ophir ? which analysts said was ?packaged for sale? ? and the expansionary Indonesian group would create a new force in the south-east Asian oil and gas scene.?This is a bold move by Medco, and if successful would create a south-east Asian upstream powerhouse,? said Angus Rodger, research director at consultancy Wood Mackenzie.

The merger would add Ophir?s 25,000 barrels of oil equivalent per day to Medco?s approximately 85,000 boe/d for a combined 110,000 boe/d, with most of this coming from south-east Asia.?This would catapult the firm into being the seventh largest non-NOC [national oil company] upstream producer in south-east Asia, above Hess and BP, and just behind Repsol and Total,? Mr Rodger said.

Ophir was hit hard by the oil price crash of 2014 and has had difficulties finding a partner to finance its $1.2bn Fortuna deepwater liquefied natural gas project in Equatorial Guinea, which has caused shareholders to rush for the exit. The group?s shares have lost 90% of their value in five years.The company confirmed talks were under way but said that ?there can be no certainty that any offer will be made, or as to the terms?. It added that a further announcement would be made ?as and when appropriate?.

Analysts were unsurprised by the announcement. Alan Booth, Ophir?s interim chief executive, said last year that ?you build a business that?s valuable, so it becomes valuable for the trade?. Stephane Foucaud, an analyst at GMP FirstEnergy, said: ?The company was packaged for sale. The value was depressed; shareholders wanted a solution; the chief executive left; they have no COO?.?.?.?it ticked all the boxes [for a takeover].?

Medco?s Indonesia-focused business spans power and mining assets, but oil and gas bring in more than 80 per cent of its revenue. The company has recently expanded its E&P asset base in south-east Asia. Its share price rose 5 per cent on Wednesday.After its difficulties with Fortuna ? the licence for which expires this month after the deadline was twice extended ? Ophir has sought to shift away from exploration and return cash to shareholders. Its former chief executive, Nick Cooper, stepped down last year, with the company citing a change in direction.

No figure for the potential deal has been released, but under UK takeover rules Medco must make a firm offer by January 28. Shares in Ophir were valued at 45p in afternoon trading, up more than 26 per cent on the day and giving it a market capitalisation of ?315m.?Where the share price is trading at the moment ? if that?s the offer ? that?s pretty good,? said Mr Foucaud.

Source: Financial Times