Updated: IOG rejects £26.6m takeover proposal from RockRose

RockRose Energy executive chairman Andrew Austin
RockRose Energy executive chairman Andrew Austin

Independent Oil and Gas’ board has rejected a £26.6m takeover proposal from RockRose Energy.

It is the latest acquisition bid for RockRose who last week secured a £107million deal for Marathon Oil’s North Sea assets.

The firm said it made a “formal approach” to IOG’s board, but this has been rejected as IOG intends to continue its search for a partner to develop its assets.

RockRose said it has made “compelling” pre-conditional proposal which is more than a 50% premium to IOG’s closing share price on February 26 and IOG shareholders should be “given the opportunity to consider its merits”.

Last week IOG announced there was “serious interest” in its flagship “core” project, which includes the development of the Blythe and Vulcan gas hubs in the southern North Sea.

However, RockRose  said it would be “challenging” for IOG to fund the field development at costs of around £450m without a partner.

RockRose said it has considered partnering on the project but this would be “problematic” given IOG’s financial arrangements with London Oil and Gas.

IOG last year took out a £15m loan from London Oil and Gas, which in turn is financed by London Capital and Finance which is itself in administration.

In January, IOG said it would not be affected as London Capital is not a shareholder in London Oil and Gas.

The firm added that accepting the deal would remove risk of an unsuccessful farm out, and even if a partner was found, IOG shareholders would likely need to pay up to fund their share in the gas hub.

In a statement, the firm said: “RockRose believes that all IOG shareholders should be given the opportunity to consider the merits of the potential offer which would be at a more than 50% premium and made fully in cash by a credible bidder.

“Furthermore, it is, in the view of RockRose, the fiduciary duty of the IOG Board to engage with RockRose immediately including providing it with access to the convertible loan documents and other documents representing other dilutive securities while the Board considers, in conjunction with its advisers, the merits of the potential offer.”

IOG confirmed the board rejected the proposal but said the possible offer is “opportunistic and materially undervalues” the firm.

It said: “The announcement by RockRose contains a number of statements which the Board finds misleading and with which the Board does not agree.

“Moreover, the Board believes that this proposal is opportunistic and materially undervalues the Company and does not attribute fair value to IOG’s assets, nor their significant future upside. The Board therefore unanimously concluded to reject this proposal unequivocally.

“The Board continues to focus its efforts on unlocking value in the Company by securing a farm-out partner for its core project to provide funding optionality in parallel with IOG’s stated capital markets funding plans.

“The Board’s rejection of RockRose’s approach was given with the full support of London Oil & Gas Limited.”

IOG’s share price has increased more than 30% since the news broke of the offer.

The “core” project involves the Blythe and Vulcan gas hubs in the southern North Sea thought to be capable of producing 300 billion cubic feet of gas, as well as integrating the nearby Harvey discovery.

First gas is expected within 20 months of a final investment decision being made, targeted for the first half of 2019.

Last week RockRose completed a deal to buy US operator Marathon Oil’s North Sea business.

The deal marked the start of RockRose’s transition to operator for the first time.

Marathon’s 250-strong workforce will transfer to the company once the deal is completed in the second half of the year.