Corporate Finance: EnCore Oil to be sold to Premier Oil

Corporate finance news publications were recently abuzz with reports of EnCore Oil, a North Sea oil exploration company, being acquired by Premier Oil for £221 million. The EnCore board had put forth a recommendation of 70p per share, giving shareholders a chance to accept either hard cash or new stocks in Premier. Shares in EnCore dropped by over 8 percent to 45.25p following the news, but recovered to 72.5p the very next morning, indicating that some corporate finance experts clearly regard this price as too low.

Corporate Finance Blog: Premium’s Gain from the Deal

The upside for Premier in this deal, according to corporate finance specialists, is that they get a chance to raise their interest in the Catcher field right to 50 per cent, from the earlier 15 per cent mark; there’s also the fact that they’d get to operate one of the biggest discoveries of recent times in the UK North Sea. This deal would also give Premier an added 16.6 per cent in the Cladhan discovery. Taken together, these discoveries would amount to an approximately 17 million additional barrels of discovered crude reserves. EnCore’s strong exploration assets would also stand Premier in good stead, with the addition of the Coaster prospect east of Catcher (100 per cent) and Spaniards (28 per cent) and Tudor Rose (per cent) prospects close to Premier’s current Scott area facilities.

Corporate finance experts are of the opinion that the acquisition makes sense in the long-term for EnCore, while giving shareholders the choice to retain their investments in EnCore’s assets within the enlarged portfolio or simply cash out. The act of being acquired by Premier has given EnCore shareholders a chance to crystallize the value created through the company’s excellent survey and discovery track record.

Premier intends to use available liquid assets to fund the acquisition. Investors have been assured that Premier’s fiscal position and overall liquidity shall not be dented and that the already ongoing development and exploration programs, that they already had prior to acquiring EnCore’s assets, would not suffer.

Corporate Finance News: EnCore’s Advice to Investors

EnCore’s board of directors has been advised by a leading corporate finance advisory firm as to the terms and conditions of the transaction and their ramifications vis-à-vis investor welfare. In line with their recommendations, the EnCore Directors plan to unanimously and unequivocally advise shareholders to vote in favor of the resolutions pertaining to the Acquisition at the Meetings (or in the event that the Acquisition is implemented  by way of an Offer, that the investors should accept the settlement amound due to them (in proportion to the volume of their investments in EnCore) in such an offer.

Premier has been provided with irrevocable undertakings by EnCore’s directors to vote for the Scheme corresponding to their total profitable holdings adding up to 21,692,984 issued EnCore shared in all and standing for approximately 7.4 per cent of EnCore’s issued share capital.

BlackRock Investment Management (UK), EnCore’s largest investor in terms of volume of shares held, has reiterated its decision to vote for the scheme. BlackRock has hitherto held voting privileges as a result of holding shares worth about 5.8 per cent of EnCore’s issued share capital.

Keep watching this space for more corporate finance news.