Worldview pounces with 'deeply insulting' €8m Petroceltic offer
Published 27/02/2016 | 02:30
The board of Irish oil and gas firm Petroceltic is almost certain to urge shareholders to reject a knockdown €8.1m (£6.4m) takeover bid for the company made yesterday by its single biggest shareholder.
Analysts yesterday described as "deeply insulting" a 3p-per-share offer from Switzerland-based activist investor Worldview, which owns 29.6pc of Petroceltic.
Worldview and Petroceltic have been locked for well over a year in a bitter battle about the fate of the exploration firm, which is headed by chief executive Brian O'Cathain, inset.
Yesterday, Worldview, which is headed by Angelo Moskov, again blasted Petroceltic and claimed the company is now virtually worthless. Worldview said its Sunny Hill subsidiary was offering 3p per share only because it wanted to encourage Petroceltic shareholders to accept the offer. Shares in Petroceltic slumped to 10p in London from 18p.
"The directors of Sunny Hill believe that the value of the equity in Petroceltic is close to zero, given the parlous financial position of the company," Worldview said yesterday.
"However, as an incentive to Petroceltic shareholders to accept the offer, in order to allow Sunny Hill and Worldview to accelerate addressing the company's indebtedness issues, Sunny Hill is prepared to offer 3p in cash per Petroceltic share."
In late 2014, Dragon Oil pulled a £500m (€635m) takeover offer fo Petroceltic as oil prices plunged. Petroceltic has just under $218m (€199m) in debt under a senior bank facility, and has a rolling waiver on repayments until March 4. It's been engaged in talks with lenders, and management have been exploring a potential sale of the business since December.
That strategic review is continuing, with Petroceltic management having indicated that its lenders are prepared to consider further waivers as long as progress is being made.
A collapse in oil and gas prices hasn't helped Petroceltic's position, but it continues the development of its key asset, the Ain Tsila gas field in Algeria, in which it owns a 38.25pc stake. Gas is expected to start flowing from the field in 2017. Petroceltic expects Ain Tsila to produce about 2.1 trillion cubic feet of gas sales during its 30-year lifespan. Ai Tsila is about twice the size of the Corrib gas field off the west coast of Ireland.
Petroceltic said yesterday that it will make a statement "in due course" and in the meantime urged its shareholders to take no action.
"We anticipate that shareholders will see this deal as deeply insulting as it is clear that the value of the Ain Tsila field is certainly far greater than 3p per share - even if sold in a firesale," said analyst Ashley Ketly at UK brokerage Cenkos.
He added that with Petroceltic's shares having been at 18p on Thursday, not many shareholders are likely to hand over value to Worldview.
He said that is somewhat ironic, "given that Worldview has been instrumental in destroying much of the value in Petroceltic".
Analyst David Round at BMO Capital has put a net asset value of 44p a share on Petroceltic.
"In our view, this [offer] materially undervalues Petroceltic's assets and future potential, even taking into consideration Petroceltic's distressed financial position and reduced bargaining power," he said. Worldview's Mr Moskov said that while Petroceltic's assets may arguably have long-term potential, if the right capital structure and management team were in place, that he believes the company requires significant restructuring and a revised strategic direction.
"Our offer provides Petroceltic shareholders with an all cash exit from a high risk, distressed investment, against the background of unprecedented uncertainty in the oil and gas sector," he said.
Worldview said a takeover of Petroceltic is dependent on valid acceptances in respect of 90pc of the exploration firm's shares being received.
Petroceltic chairman Robert Adair owns 19pc of the Irish firm.