European shale specialists San Leon have dumped plans for a takeover of Turkish oil company Alpay after admitting the deal was not good value for money.
The exploration firm had agreed a deal last September to take a 75% stake in Alpay, which holds seven conventional oil and gas licences in Turkey.
But now San Leon has decided the £2.4million deal would not boost the company’s production or cash levels high enough, and has scrapped the acquisition in favour of investing more in Polish shale projects.
“The main rationale for the Alpay transaction was to provide cash flow to the company,” said San Leon chairman Oisin Fanning.
“However, subsequent deals in Poland, the company’s core operating area, have positioned Poland to deliver cash flow and production more efficiently, enabling the Group to reach its target of becoming at least break-even on a cashflow basis during 2014.
“Given the increased risk to achieving the projected Alpay production targets and cash flows envisaged at the signing of the SPA, the board … no longer felt the Alpay deal was to be in the best interest of shareholders in its agreed form.”
The company said it was set to focus instead on the Baltic Basin region of Poland, where it has already been enjoying success with its shale gas operations.
The move comes following new agreements in Poland for Baker Hughes to develop the Sierkierki gas field, and TransAtlantic to develop the Rawicz project, lessening San Leon’s costs on the projects.
“Our new joint ventures with Baker and TransAtlantic have further strengthened our projects in Poland and will allow us to realise the true upside that we have been working towards,” said Mr Fanning.
“We are now on the verge of production and cash flow in our core operating area.”