Premier Oil, the independent oil and gas exploration business, yesterday admitted it was a bid target after agreeing a (pounds) 443m ($670m) deal to change its ownership structure and dispose of its two biggest investors.
The deal sparked life into the share price of the business, which also posted a 23% rise in first-half profits. Analysts said that in the long term its days as an independent oil business were numbered.
Under the deal, which was widely trailed, Amerada Hess and Petronas, the Malaysian state oil business, are giving up their combined 50% stake in the UK firm.
In return for cancelling their shares, the pair will also pay cash and assume debt in exchange for some of Premier's key assets in the politically controversial areas of Myanmar - formerly Burma - and Indonesia.
The deal removes the burden of a complex ownership structure which had been seen as an
obstacle to any takeover bid, and frees the company from becoming entangled in south-east Asian political issues.
It also cuts Premier's debts from (pounds) 135m to (pounds) 111m and reduces its production from 50,000 barrels of oil equivalent per day (boepd) to some 30,000-35,000 boepd.
Charles Jamieson, chief executive, said the complex deal had taken a year to negotiate. Around (pounds) 8m was spent on advisers' fees and other costs associated with the transaction. He insisted that the decision to exit Burma, whose questionable human rights record has meant that Premier has been targeted by human rights groups, was purely a ''commercial decision''.
Jamieson admitted, however, that Burma has ''pariah status'', which meant it was difficult to sell on any assets which are linked to that country.
The ownership structure dates from 1999 when Premier sold the stakes to secure financing amid mounting debts and weak oil prices. Settlement of the issue forced Premier's shares up 6% to close at 25p, with some analysts forecasting the company's price could hit 30p by early next year when the transaction completes.
Jamieson admitted that a bid premium would now be factored into the share price.
He said: ''It has been a traditional way to collect value, so they like to have that element in the share price. We run the business to extract maximum value and if someone offers money, we will put it to shareholders.
''But no-one has rung up this morning and said: 'Here's 50p'.''
Richard Slape, an analyst at Charles Stanley, said a bid was more likely in the medium term. He said: ''There is no prospect this side of Christmas, but the principle is correct. The protection has been stripped away.''
Tony Alves, an analyst at Investec, said larger independents such as Edinburgh-based Cairn Energy were likely to make a bid. At yesterday's close the company was valued at (pounds) 202m plus debt.
Premier, which will continue to operate in Britain, Pakistan and Indonesia, also reported strong net profits up 23% to (pounds) 15.3m for the six months to June 30, helped by a 42% jump in production.
Why are you making commenting on The Herald only available to subscribers?
It should have been a safe space for informed debate, somewhere for readers to discuss issues around the biggest stories of the day, but all too often the below the line comments on most websites have become bogged down by off-topic discussions and abuse.
heraldscotland.com is tackling this problem by allowing only subscribers to comment.
We are doing this to improve the experience for our loyal readers and we believe it will reduce the ability of trolls and troublemakers, who occasionally find their way onto our site, to abuse our journalists and readers. We also hope it will help the comments section fulfil its promise as a part of Scotland's conversation with itself.
We are lucky at The Herald. We are read by an informed, educated readership who can add their knowledge and insights to our stories.
That is invaluable.
We are making the subscriber-only change to support our valued readers, who tell us they don't want the site cluttered up with irrelevant comments, untruths and abuse.
In the past, the journalist’s job was to collect and distribute information to the audience. Technology means that readers can shape a discussion. We look forward to hearing from you on heraldscotland.com
Comments & Moderation
Readers’ comments: You are personally liable for the content of any comments you upload to this website, so please act responsibly. We do not pre-moderate or monitor readers’ comments appearing on our websites, but we do post-moderate in response to complaints we receive or otherwise when a potential problem comes to our attention. You can make a complaint by using the ‘report this post’ link . We may then apply our discretion under the user terms to amend or delete comments.
Post moderation is undertaken full-time 9am-6pm on weekdays, and on a part-time basis outwith those hours.
Read the rules hereComments are closed on this article