Falklands-focused Rockhopper exploration has outlined plans to take over Mediterranean and North Africa-focused Mediterranean Oil & Gas in a cash and shares deal.
The deal comes as Rockhopper looks to re-focus its portfolio after being a key player in the frontier Falklands exploration activities, which included the Sea Lion discovery, now operated by Premier OIl.
For MOG, the deal will help it grow after it has suffered a "series of setbacks" on its Guendalina field - its principal asset, offshore Italy - and regulatory delays on its main development project, also offshore Italy.
Image: The Hagar Qim prospect, due to be drilled by MOG in 2014. Image from MOG.
MOG has operations in Italy, Malta and France. It has gas production onshore and offshore in Italy, and a portfolio of exploration, appraisal, and development opportunities with 33MM boe reserves and contingent resources and over 1200MM boe total unrisked prospective resources.
Net production from the Guendalina field was 35,650sq cu m/d as of 13 May 2014. Development activities are focused on MOG’s 100%-operated interest in the offshore Italian Ombrina Mare discovery, which has 26.5MM boe 2C contingent resources, according to Rockhopper.
The firm is due to spud the Hagar Qim prospect in Offhsore Malta Area 4, Block 7, in 2014, as part of a high-impact exploration in the area, targeting 27MM boe net mean unrisked resources, says Rockhopper (Genel Energy is operator with 75% WI. MOG holds 25%). MOG also holds additional development and exploration opportunities in Italy, Malta and France.
Keith Henry of MOG said: "This is a good transaction for our shareholders, offering them the combination of both cash and shares in Rockhopper today, while also providing the opportunity to benefit from the potential upside of our Malta well. Sadly, a series of setbacks over the past year at the Guendalina field, MOG’s principal producing asset, and the continuing regulatory delays to Ombrina Mare, our key development project, have prevented us from implementing our strategy of growing our portfolio in the Mediterranean region.
Image: The North Falkland basin, from Rockhopper
"In the current market conditions, the MOG board strongly believes that this can only be achieved by a significantly more capitalized company. In addition to the cash element, Rockhopper’s offer represents an opportunity for MOG shareholders to receive shares in Rockhopper, while still retaining a contingent interest in the high risk exploration well offshore Malta that will spud in the next few days."
AIM-listed Rockhopper's principal asset is 5800sq km of prospective oil and gas acreage in the North Falkland basin, which contains up to 450MM bbl of 2C contingent resources if a gas cap does not exist on the western flank of the Sea Lion field. The firm has about US$250 million (£147 million) in cash.
Pierre Jungels, Rockhopper's chairman, said: "This transaction represents an important milestone for the company as we add production to our portfolio and broaden our exploration and development opportunity set, by establishing ourselves in an area our team understands well. While the acquisition cost and capital exposure are modest in relation to our balance sheet, the upside potential is significant and we believe that the new acreage will create an attractive entry platform to one of the most exciting regions in the industry at this time."
Under the terms of the deal, shareholders of MOG will receive 6.5p per share, comprising 4.875p in cash and 0.0172 shares of Rockhopper per MOG share.
In addition, MOG Shareholders will receive a contingent entitlement up to a maximum amount of 3.550p in cash for each MOG Share, assuming MOG’s fully diluted ordinary share capital is 451,192,831.
The availability of the contingent consideration Offer, and the amount of cash which may ultimately be payable in connection therewith, will be determined by the success of the Hagar Qim exploration well. The contingent consideration will only be payable if the 2C contingent resources of liquid hydrocarbons estimated to be potentially recoverable equal or exceed 80 mmbbl in total.The offer values the entire issued and to be issued share capital of MOG at about £29.3 million; representing a 15.6% premium to MOG's closing share price of 5.625p on 22 May 2014.
Rockhopper says it has received irrevocable undertakings to vote in favor of the Scheme at the Court Meeting and in favor of the resolution at the General Meeting in respect of a total of 137,885,951 MOG Shares, representing, in aggregate, about 31.96% of MOG's existing issued ordinary share capital.
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