NORTH Sea explorer Premier Oil said yesterday it was buying smaller rival EnCore Oil in a £221million deal.
Premier said it had made a 70p-a-share offer for EnCore, a 55% premium on its closing price on Tuesday.
The move means Premier would become operator of the Catcher field in the North Sea with a 50% stake.
In addition to Catcher, which is estimated to hold 40-80million barrels of oil, Premier will also take on EnCore’s 16.6% interest in Cladhan, which could contain in excess of 300million barrels.
Premier said yesterday all 10 of EnCore’s employees, including the directors, would be transferred to the larger company.
The three founding directors of EnCore – Alan Booth, Eugene Whyms and Graham Dore – hold more than 10million, 9million and 7million shares in the company respectively.
The cash deal would also include EnCore’s UK ring-fenced tax losses, which are estimated to be £31million based on historic expenditure.
EnCore said the board had agreed to the acquisition because the company would have had to move its focus away from exploration and on to development in the near future, and it was felt the listed business would not be able to raise the required funding in the current economic environment to become a production firm.
Premier chief executive Simon Lockett said the company looked forward to building on what EnCore had already achieved.
He said: “This is a perfect fit for Premier, given our existing North Sea assets. Operatorship of and the increased equity position in Catcher will help us to progress this development in line with our timeframe and maintain momentum across our portfolio.”
Mr Booth, chief executive of EnCore, said the acquisition gave investors the opportunity to realise the value created by it highly successful exploration track record and added that it was in line with the company’s strategy.
He said: “When we set up the company in 2005, it was always with a view to creating value through exploration and appraisal.
“We felt our skills were best deployed in the early part of the cycle before moving assets on to a bigger company whose skills and resources are better able to develop them and take them to the next stage.”
Alec Carstairs, accountant Ernst and Young’s office managing partner in Aberdeen, said he expected further consolidation of North Sea assets in the future. He added: “It is positive news for the region and for Premier, which is expanding its reach and it has the capital required to develop the fields.
“The EnCore shareholders also have a good chance to take advantage of the value of the company’s exploration work. I think it is a good deal for both sides.”