Energy investment firm Reabold said today it was “disappointed” and “surprised” by takeover target Deltic Energy’s assessment of its portfolio.
London-listed Deltic said yesterday that it had “unequivocally rejected” an approach from Reabold, which would have valued it at £12.3 million, a premium of £1.2m on its market cap at the time.
Deltic said the valuation was not “appropriate” and that a combination with Reabold would expose its shareholders to risky investments.
Deltic, formerly Cluff Natural Resources, claimed to have a “detailed understanding” of a number of Reabold’s investments, including West Newton, and said it had “serious concerns” in relation to the “technical viability, materiality and limited potential upside” of those projects.
Reabold responded today, saying Deltic’s view of West Newton appeared to stem from datasets from 2017, which wouldn’t factor in the successful A2 well.
The company insisted West Newton had the potential to be the largest onshore hydrocarbon discovery in the UK since 1973 and said it would be “pleased” to sit down with Deltic’s board and explain the upside.
Deltic had also complained that the offer from Reabold did not account for its “significant non-cash assets”, including its shares in the two wells it intends to drill with Shell, and did not even reflect its existing cash balance.
Reabold said it was optimistic about Deltic’s drilling prospects, but argued there won’t be any significant activity or news flow until Shell starts drilling Pensacola, in the southern North Sea, in the second half of next year, whereas two wells are to be drilled at West Newton later this year.
On Deltic’s cash balance of £13.2m at the end of March, Reabold said it expected its target’s general and administrative expenses and its share of drilling costs to result in it “burning through” those reserves.
A spokesman for Reabold said: “Accordingly, Reabold strongly believes in the merits of the possible offer and will seek to engage with certain Deltic shareholders, including those with which it has already had initial conversations regarding the strategic merits of the possible offer.
“Reabold hopes that, should Deltic shareholders be supportive of the possible offer, they are not denied the opportunity to decide on its merits.”
Recommended for you
