Elaine Maslin, 13th June 2012
Edinburgh-based oil and gas firm Cairn Energy said this morning it has agreed a deal to buy Nautical Petroleum.
The transaction would see Nautical shareholders get 450p cash per share, valuing Nautical at about £414million – a premium of 51.1% on yesterday’s closing price of 287.8p per share.
This morning Nautical shares were trading at 460p per share, up 54% and 10p above the offer price.
The deal, subject to shareholder agreement, would be Cairn’s second major acquisition this year and a further substantial move into the North Sea, following its acquisition of Norway-based Agora Oil & Gas for about £280million.
Its acquisition spree follows a cash windfall from selling its Cairn India operations to Vedanta and a high-risk exploration programme off Greenland, which yielded no commercial finds.
Announcing the planned takeover of Nautical, chief executive of Cairn Simon Thomson said: “This acquisition is another step towards building a balanced portfolio of transformational exploration, appraisal and development assets, and complements our recent acquisition of Agora to help build a platform in North West Europe.
“Specifically we will increase our equity position in the Catcher area, which contains several oil discoveries and follow-on prospectivity, and acquire a material stake in Kraken, another large, North Sea oil development project.
“In addition to these discoveries, this acquisition will add a number of North Sea exploration prospects to our existing 2012 and 2013 exploration programme in the UK and Norway.”
Cairn said buying Nautical would increase its interest in the Catcher area by 15%, taking Cairn’s overall interest to 30%.
It would also provide Cairn with a 25% interest in Kraken, another large, North Sea oil development project, a 6% interest in the Mariner oil field, planned for development sanction by the operator, Statoil, and 50% interest in Block 9/1a containing the Ketos prospect.
Liberum Capital said the deal was a good move but highlighted that in the wider market the industry saw far more value than the equity market in such assets.
Cairn’s cash reserves were $1.1 billion at the end of March, following the firm’s selling of its Cairn India operation, and an estimated $980 million after Agora acquisition in May. The Nautical deal would leave it with $440 million, said Berstein Research.
Analysts at Bernstein said: “Through its acquisition of Nautical Petroleum, Cairn has completed the second stage of its portfolio rebalancing, establishing momentum in the UK, as a hub for future development and exploration.
“We believe Cairn have made the right choice: the UK North Sea offers high-value reserves, in a stable, well-understood basin, with well-established infrastructure and a well-developed services industry.
“Cairn’s Agora acquisition has already added value – Nautical appears to add to this momentum.”
While Cairn said it had secured approval for 27.25% of shareholders for the deal, Nick Copeman of Oriel Securities said the price for Nautical was good but “if anything, may leave the door open for a counter offer”.
Analysts at Westhouse named Statoil, Maersk, Taqa, Canadian independents and the Kuwaiti National Oil Company as potential rival bidders.