RAB Energy Fund, which holds an 8.1% stake in DEO supports Parkmead's £12.7m takeover bid
A majority shareholder in oil and gas exploration firm DEO Petroleum has today indicated it will support a £12.7 million takeover bid from Parkmead Group.
RAB Energy Fund, which holds an 8.1 per cent stake in DEO, has today indicated it will approve Parkmead's £12.7 million takeover offer.
The RAB support means more than 56 per cent of shareholders in DEO now support the takeover, which requires 75 per cent support to go through.
Parkmead is offering investors two Parkmead shares for each share held in Deo, with its bid valuing DEO shares at 29.5 pence each, representing a premium of 40.5 per cent on the closing price of 21 pence when the bid was tabled on May 25.
Shares in DEO were trading at around 25 pence in early trading today.
Parkmead is led by Dana Petroleum founder Tom Cross and has its main operations office in Aberdeen.
Cross left Dana in 2010 after losing a £1.7 billion hostile takeover battle with Korean National Oil Corporation (KNOC).
He joined Parkmead last year as executive chairman, and has since pulled together his core executive team from the Dana Petroleum business.
Parkmead tabled its takeover bid for Aberdeen-based DEO at the end of last month.
DEO and Parkmead and have been working in a 50/50 strategic partnership in the North Sea since May 2011 to pursue opportunities in three specific locations.
Both companies agreed to pursue opportunities in three specific North Sea locations in the Perth North, Gamma, Dolphin and Sigma Blocks in the North Sea, as well as bid for licences together in this year's UK Continental Shelf licensing round.
In full year results posted today, DEO Petroleum has reported an operating loss of £0.6 million for the 2011 year to December 31, 2011.
This follows on from a loss of £800,000 reported last year, though the bulk of that loss was related to costs in raising nearly £15 million to acquire a 42 per cent stake in the Perth license interest in the North Sea from Nexen in a £10.5 million deal.
In total, DEO holds a 52.03 per cent stake in the Perth prospect.
DEO has now submitted a Field Development Plan for its Perth interests, with the phase one plan to drill a total of six wells in the prospect.
The company has today upgraded its estimate of recoverable oil reserves from phase one at around 21.5 million barrels of oil equivalent.
However, DEO said global supply chain demand may impact on plans to deliver the first oil from Perth in 2014, though talks with partners are still progressing.
DEO estimates the development costs for its share in the Perth prospect would come in at around £140 million, and if shareholders approve the Parkmead bid, the combined companies will work together to explore funding options.
If the takeover fails, then DEO has indicated it will consider introducing a new industry partner to progress the development.
DEO is currently debt free and had cash reserves of £2.2 million at year end on December 31, 2011.
David Marshall, chief executive of DEO, said: "2011 was a successful year for DEO.
“We have met our objectives of delivering a Field Development Plan (FDP) and Environmental Statement (ES) to the the Department of Energy and Climate Change (DECC) and have upgraded and increased our Perth Resources to 2P Reserves.
“DECC has approved the ES and we believe all technical requirements of the FDP have been addressed. We have also delivered an appraisal opportunity with a well on Gamma Spaniards at no additional cost or risk to DEO.
“The recently announced proposed acquisition by Parkmead will not only help DEO progress the Perth development but also to pursue other opportunities in key areas of the UK Central North Sea.
“It will also allow the combined team to focus on its core expertise in development and production.
“Both companies have a deep understanding of the North Sea, complementing one another in their core skills. We believe this combination will allow DEO to deliver further value to shareholders.”