Deltic Energy’s largest shareholder has backed the company’s efforts to stave off a hostile takeover bid from London-listed energy investment firm Reabold Resources.
Michael Spencer, a Tory party donor who holds 16.8% of Deltic through a company called IPGL, said he would shun the proposed offer from Reabold.
Conservative Party treasurer from 2006 to 2010, Mr Spencer said he would continue to support Deltic’s management team and had faith in the company’s technical capability and portfolio of assets.
Last week, Reabold said it would seek to “engage” with Deltic shareholders to gauge whether they would back its proposed offer, which would have valued the firm at £12.3 million, a premium of £1.2m on its market cap at the time.
Deltic’s board had already “unequivocally rejected” the approach from Reabold, saying 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 by saying it was “disappointed” and “surprised” by Deltic’s assessment of its portfolio.
It suggested Deltic’s view of West Newton stemmed 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.
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