Edinburgh-based Capricorn Energy is “assessing all options” to its proposed merger with Tullow Oil even though board directors still believe the deal will deliver significant value for shareholders.

Announced on June 1, the £1.5 billion “merger of equals” which will see Capricorn’s headquarters move to London has been opposed by a number of shareholders including Pallister Capital, which owns more than 5 per cent of Capricorn. Under the plans Capricorn shareholders would own 47% of the enlarged business versus 53% for Tullow shareholders.

Simon Thomson, who has been chief executive of Capricorn and its predecessor Cairn Energy for the past 11 years, said directors continue to believe that the tie-up with Tullow will generate value by creating an Africa-focused energy company. However, the board is also “mindful of external factors and market conditions” and is assessing all options.

“The company is exploring a number of expressions of interest relating to alternative transactions, and is engaging with those parties expressing interest to evaluate potential outcomes,” Mr Thomson said.

His comments came as Capricorn reported a disappointing set of half-year results, with a reduction to full-year production guidance after drilling fewer wells in Egypt than expected. There was also a further run of bad luck in the North Sea as the company confirmed that its Diadem well has come up dry.

Capricorn’s operating losses narrowed to $37.3m (£32.3m) during the six months to the end of June, down from $47.4m a year earlier.

Production from its assets in Egypt – acquired in September of last year in a deal with Shell – averaged just 35,500 barrels of oil equivalent per day (boepd). It is now guiding full year production of between 33,000 and 36,000 boepd, down from a range of 37,000 to 43,000 previously.

READ MORE: Capricorn Energy, formerly Cairn Energy, and Tullow Oil to merge

Capricorn only drilled 14 of the 20 wells intended in the first half after two of its five rigs encountered delays. Those rigs should be operating on wells this quarter, Capricorn said, allowing production to scale up.

Turning to its operations in the UK North Sea, the Scottish company said its Diadem well near the Shell Nelson platform had failed to find hydrocarbons after drilling to a depth of 51 metres. It will now be permanently plugged and abandoned, following the same fate as Capricorn’s Jaws well in the first half of this year.

Capricorn is partnered 50-50 with Shell on both Jaws and Diadem. In total, Capricorn spent $27.3m on exploration in the UK in the first half of the year, the majority of which was spent on those two wells.

“This is the first set of results with full production from the portfolio in Egypt, and investors will be disappointed with the results after the high hopes from last year,” said Ashley Kelty, senior analyst at Panmure Gordon.

“However the elephant in the room remains the terms of the takeover by Tullow Oil – suggestions from investors that the deal may be rejected due to the low premium of [less than] 5%, and this will be at the forefront of investors’ minds for the time being.

“Needless to say, these results will not impress Tullow investors either.”

READ MORE: Edinburgh oil firm gets long-awaited tax refund in India

The merger with Tullow is expected to go to a shareholder vote in October or November. Assuming it is passed, it would then need to be approved by a court with completion targeted by the end of the year.

Capricorn said it was “delighted” to return more than $500m (£433.8m) to shareholders in July after receiving a tax refund of approximately $1.06 billion from the Indian Government, bringing an end to a dispute that started in 2014.

The row started after the Government of India imposed a retrospective tax bill on what was then Cairn Energy in 2014. It concerned events leading up to the flotation of Cairn’s former subsidiary in India in 2007 and a related initial public offering.

The remaining proceeds will be used to strengthen Capricorn’s balance sheet, allowing the company to focus on securing “sustainable short-cycle production to support cash flow generation”.

“The acquisition of the Egypt assets last year was a first step in the new growth platform and met an ambition to operate in regions with strong demand trends,” Capricorn said.

“We intend to use our balance sheet strength and differentiated financial flexibility to add further scale to our production base in the next phase of strategic delivery.

“The proposed merger with Tullow Oil is an acceleration of this strategy and presents a unique opportunity to create a leading African energy company with a material and diversified asset base and a portfolio of investment opportunities delivering significant production growth and sustainable, regular dividends.”

But the company also noted that the implied value of the merger with Tullow is less than Capricorn’s current net asset value. Shares in Capricorn closed yesterday’s trading 5.4p lower at 229p.