North Sea independent exploration firm Ithaca Energy has agreed a deal to buy fellow London AIM-listed explorer Valiant Petroleum.
Ithaca said the deal, which values Valiant at about $309million, would establish it as “a leading mid cap North Sea oil and gas operator” with 2P reserves of about 74mmboe.
It would also more than double Ithaca’s current forecast 2013 production to 14-16kboe/d (90% oil), rising to approximately 27kboe/d in 2015.
It would also see about a four-fold increase in Ithaca’s anticipated 2013 cash flow from operations to US$400 million, rising to over US$700 million in 2015, said Ithaca.
Analysts at First Energy Research said the deal, a premium of 37% on Valiant’s last closing price of 346.5 pence per share, overvalued Valiant’s producing assets and debt position but was below its total risked valuation of the firm’s assets, reflecting upcoming exploration campaigns.
“The acquisition will also provide high impact exploration drilling catalysts to the Ithaca story,” said First Energy.
Valiant, based in Woking, Surrey, had announced a strategic review last September, a move described as assessing all of its options, including selling all or part of itself or buying someone else. Later in the year founder and chief executive Peter Buchanan stepped aside from his role to mull a management buyout.
The firm was set up in 2004 and has developed a portfolio of production, development and exploration assets mostly focused on the UK and Norway as well as in Faroese waters.
Last year it announced its first operated production after its North Sea Causeway field came on stream. The project would help it reach about 11,500 barrels of oil per day (bpd) in production by the end of 2012, giving it an average 2012 daily production rate of about 6,500bpd.
Ithaca, based in Aberdeen, is focused on production, appraisal and development activities in the North Sea. Its assets include the Athena field, produced via an FPSO, and the Greater Stella Area development, due on stream in the next few months using the FPF-1 floating production unit.
The deal will be recommended to a general meeting of shareholders. Valiant’s directors hold about 1.06% of the entire issued share capital of Valiant.
Ithaca said two existing Valiant directors, Jannik Lindbæk and Michael Bonte-Friedheim, would join Ithaca’s board as non-executive directors.
Lindbæk was previously chairman of the Norwegian international oil and gas company Statoil, prior to its merger with Norsk Hydro in 2007. Bonte-Friedheim, an investment banker by background, was previously non-executive chairman and subsequently CEO of Mediterranean Oil and Gas, a UK AIM-traded company.
Jack Lee, non-executive chairman of Ithaca said: “This proposed acquisition represents a significant step forward in the execution of Ithaca’s strategy to build a highly profitable 25kboe/d North Sea oil and gas company. The combined assets of the two groups have a strong strategic fit, with the acquisition materially increasing and broadening Ithaca’s producing asset base and reserves portfolio.