Bloomberg News

Premier to Buy North Sea Explorer EnCore for $340 Million

October 05, 2011

(Closes share price in fifth paragraph.)

Oct. 5 (Bloomberg) -- Premier Oil Plc, a London-based oil explorer, agreed to buy EnCore Oil Plc for 221 million pounds ($340 million) to add reserves and production in the North Sea.

Premier will pay 70 pence a share, about 55 percent more than EnCore’s closing price yesterday, the company said today in a statement. The acquisition will add about 17 million barrels of discovered oil reserves and resources for Premier.

“I expect to continue to look into acquisitions,” Chief Financial Officer Tony Durrant said in a phone interview. “We tend to do acquisitions when either the capital markets or the oil prices are weak.”

Oil companies with strong balance sheets are taking advantage of falling share prices to examine possible acquisitions of cash-hungry oil and gas explorers. Premier has been seeking to expand in the North Sea and increase production to about 100,000 barrels of oil equivalent a day by 2014.

EnCore jumped 64 percent to 74 pence in London, the biggest one-day gain in 16 months. Before today, the shares had fallen 66 percent this year. Premier slipped 0.8 percent to 335.9 pence.

The acquisition is “a longer-term positive, even if the market is initially nervous about the price paid,” Sam Woodward, an analyst at MF Global, wrote in an e-mailed report. “In terms of our investment case, we highlighted M&A potential of Premier as a predator.”

Premier had $1.3 billion in cash and available bank facilities prior to the EnCore announcement, Durrant said.

Catcher Field

The acquisition will increase Premier’s share in the Catcher field, one of the largest discoveries in the U.K. North Sea in recent years, to 50 percent from 35 percent. The company’s spending on the project will rise by about $200 million to $600 million with the final investment decision expected early next year, Durrant said.

“This is a perfect fit for Premier given our existing North Sea assets,” Chief Executive Officer Simon Lockett said in the statement.

EnCore directors, who together hold about 7.4 percent of the company, have agreed to accept the terms of the offer, Premier said. BlackRock Investment Management (UK) Ltd., which holds about 5.8 percent of EnCore, will also accept the offer.

RBC Capital Markets advised Premier and Rothschild consulted EnCore on the deal.

The latest acquisition will be Premier’s fourth in a year after acquiring Wytch Farm assets, the Solan field interest and a stake in the Fyne Area in the U.K. central North Sea.

Indonesia Delays

Premier faced “unexpected delays in the issuing of certain approvals” by Indonesia of the Gajah Baru gas export agreement, the company said today in a separate statement. The government wants to ensure domestic gas supplies amid fuel shortages and is discussing with Premier possible gas swaps for volumes bound for Singapore, which can’t be diverted to the Indonesian market, Durrant said.

“We are expecting to get approval very shortly,” he said. “The minister frankly is nervous about signing an export certificate when the country is short of gas.”

--Editors: Alex Devine, Amanda Jordan

To contact the reporter on this story: Eduard Gismatullin in London at egismatullin@bloomberg.net

To contact the editor responsible for this story: Will Kennedy at wkennedy3@bloomberg.net


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