Another London-listed mid-cap oil firm is in the crosshairs of a prospective bidder with Ophir Energy (OPHR) joining Faroe Petroleum (FPM:AIM) on the block. However, there are reasons to believe a bid at Ophir will be received more kindly than the one pitched at Faroe.
Shares in Ophir are up 33.2% to 47.6p on the news it is in discussions with Indonesia’s Medco over a cash bid for the company. Medco has until 28 January to make a formal bid.
Faroe meanwhile dips 1.9% to 144.2p as it unveils an independent audit of its asset base suggesting it could be worth nearly 50% more than 152p hostile takeover offer on the table from Norway’s DNO.
The report by Gaffney Cline puts the value of Faroe’s producing wells and exploration projects at between 186p and 225p in per share terms. Less helpfully the company also announces a disappointing result from its Brasse East exploration well.
DIFFICULT TO AGREE A ‘FAIR’ PRICE
Commenting on the Ophir deal, AJ Bell investment director Russ Mould says volatile oil prices make reaching an agreement on an equitable price for both parties difficult.
‘Oil exploration can be an unforgiving activity and with Ophir Energy trading at just a fraction of the market value it enjoyed in the early 2010s it is perhaps unsurprising a potential cash bid has emerged for the company.
‘How generous its Indonesian suitor Medco is prepared to be is open to question. With oil prices still volatile, any deal could flounder over a lack of agreement on what represents a fair value for the business.’
As Mould observes, Ophir has struggled to get its Fortuna floating LNG development off the ground for years and broker Cantor Fitzgerald adds: ‘This will get investors excited that they may get a return for their investment in the near term.’
