HURRICANE Energy has agreed a deal to be taken over by Prax Exploration & Production, a British fuel refining, storage, distribution, and sales conglomerate, following an approach that values the West of Shetland pioneer at up to £250 million.

Shares in Hurricane surged in early trading yesterday, before losing gains as the day went on, after bosses recommended an acquisition that would see investors receive up to 12.5p per share, depending on the delivery of supplementary dividends and deferred considerations.

That would represent a premium of approximately 84% to the Hurricane closing price of 6.8p on November 1, 2022, the last business day before the company launched its formal sale process.

Hurricane has a 100% interest in the Lancaster field West of Shetland, which it discovered in 2009 and brought into production in 2019. The company’s work on Lancaster attracted interest in the industry as it involved targeting a layer of granite called the fractured basement, which other firms had ignored.

Hurricane, which has made other finds in the area, ran into difficulties after the outbreak of the pandemic send Crude prices tumbling, before slashing estimates of the size of the Lancaster discovery.

It came close to being seized by bondholders in June of 2021 before experiencing a dramatic upturn in fortunes last year, boosted by the surge in oil prices that followed Russia’s invasion of Ukraine. The company generated revenues of $311m in 2022, up from $241m the year before.

Hurricane put itself up for sale on November 2 after rejecting an unsolicited takeover approach that it said undervalued the company. It said it has since received “multiple proposals from credible counterparties”, and recently resisted moves by activist investor Crystal Amber calling for the removal of chief executive Antony Maris and chairman Philip Wolfe, before its board agreed yesterday’s deal with Prax.

Mr Wolfe said: “I am pleased by the outcome of what has been a thorough and exhaustive formal sale process. The Hurricane board believes that the acquisition will deliver more cash than Hurricane shareholders are likely to have received from Hurricane’s Lancaster oil field, on a much-expedited time-frame, as well as mitigating the risks associated with production from a single well development.

“In addition, the deferred consideration units offer the opportunity to share in future production out-performance or higher oil prices, as well as revenue from future acquisitions by Hurricane. Accordingly, the board of Hurricane is pleased to recommend the acquisition to shareholders.”

Hurricane noted yesterday that the formal sale process had been “significantly diminished” by the introduction of the Energy Profits Levy, brought in by UK ministers as an additional tax on the extraordinary profits oil and gas companies have been making as a result of the surge in commodity prices that followed Russia’s invasion of Ukraine.

The levy was initially introduced last May before being extended in November, meaning the effective headline rate of tax for oil and gas companies is currently 75%.

The Government has put in place tax allowances to help ensure companies are not discouraged from investing in the North Sea, though one of the biggest players in the basin, Harbour Energy, has said the levy would result in it directing investment elsewhere. Harbour is currently consulting on redundancies in the UK, with cuts likely to focus on staff in Aberdeen.

Hurricane said 12 companies had engaged in the formal sale process in a “meaningful way, with five providing actionable offers in compliance with the requirements of the FSP”. Its board is now recommending the Prax offer to shareholders further to the process.

Prax is a wholly owned subsidiary of State Oil, which is the ultimate operating holding company of the Prax Group.

The Prax Group has 1,274 employees based over 12 offices in seven countries. Its activities include refining, marketing, and distribution of commercial fuels via its network of storage terminals and pipeline infrastructure, petrol retail forecourts, road tankers and a marine bunkering vessel fleet.

The company reported underlying earnings of $126.7m on revenues of $10 billion for the year ended February 28.

Sanjeev Kumar Soosaipillai, chairman and chief executive of Prax Group, said: “We have a strong balance sheet, which provides a solid platform to execute our strategic growth plans, the next leg of which is to build a scaled upstream business.

“We see great strategic value in being a fully integrated energy company and have invested in experienced upstream and M&A management teams to drive this. The acquisition of Hurricane will provide a strong foundation for further upstream investments. We look forward to the Hurricane team joining the Prax family.”

Shares closed up 1.2% at 6.95p.