A Dutch multinational energy and commodity trading group has made a £123million cash bid to take over troubled oil and gas exploration firm Sterling Resources.
Sterling said it would consider the unsolicited bid by Vitol Anker International, a subsidiary of the Vitol group, but that it would also be continuing discussions with others on potential deals such as a merger, sale of parts of its business or other financing options.
Analysts said yesterday the offer undervalued Sterling’s assets, particularly its exploration portfolio offshore Romania, but given the firm’s financing issues it was a good deal, despite the offer being a premium of 79% of Sterling’s last closing price on the Toronto Stock Exchange.
Sterling, which also has assets in the North Sea as well as in France, has been struggling to find funding since last year and announced recently it was deferring some payments to see it through to March.
Vitol, which holds 14% of Sterling’s shares, has already stepped in to help the firm, providing a £7.3million bridging loan to Sterling in January.
Sterling’s woes stem from its southern North Sea Breagh project, which has faced delays and cost overruns.
Costs on the project, operated by RWE Dea UK, have risen to £632million, from £485million, with first gas pushed back from July last year to March this year.
Earlier this month Sterling, which holds a 30% stake in the project, said it was aiming to raise nearly £160million through a bond issue to cover debts and provide additional funds for Breagh, as well as covering its share of the northern North Sea Cladhan project, operated by Taqa.
In a statement Vitol said: “Vitol has held discussions with Sterling’s management and, based on the company’s inability to find an acceptable long-term financing solution, Vitol Anker gas decided to pursue an offer for the company.”
Barry Leaper, research analyst at FirstEnergy Capital, said: “Although there is a lot more value in Sterling’s assets, I think it is a good deal.
“Given the financing situation at the moment, time is running out for them to put a short-term solution in place.
“Their assets in Romania have huge potential, but they have come unstuck by Breagh being delayed.
“There are other potential corporates out there who would see value in the assets, but given the timescale involved and that Vitol is willing to step in with funding it is difficult to say if the offer will flush out any other bids.”
Vitol’s upstream business has been running for about 20 years and is focused on the former Soviet Union, via its Arawak Energy subsidiary, and West Africa, through Vitol Exploration and Production, with current total production of about 8,000 barrels of oil per day, according to the firm’s website.