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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