Melrose has open mind on takeover

The chief executive of Melrose Resources has said its majority shareholder would be open minded about a bid for the firm, and noted that assets in places like Egypt, where the company operates, are in demand.

Asked if Edinburgh-based Melrose might get swept up in the round of takeovers that is sweeping the oil and gas industry, David Thomas yesterday admitted it was “always possible” that it could attract bid interest.

“We are aware that certain of our core assets such as Egypt are potentially attractive to other companies,” said Thomas, who highlighted the progress that Melrose had made in the North African state in the first half.

Melrose is one of a band of western exploration and production firms that have built big positions in Egypt. The list includes Dana Petroleum, which recently rebuffed a £1.7 billion takeover approach from Korea National Oil Corporation.

There has been a surge in mergers and acquisitions activity in the oil and gas industry since the global economy started to recover from the recession.

Research by PricewaterhouseCoopers showed that the total value of global oil and gas deals increased in the first half of 2010 to $147bn (£94bn) from $118m in the same period of 2009. The number of deals increased to 394, from 350.

Alan Barr, a director with PwC, says that the fallout from BP’s spill in the Gulf of Mexico would encourage the trend to continue. He explained: “‘Megadeals’ will become more prevalent, with scale for both operators and service companies a key objective for many companies post Deepwater Horizon.”

Thomas indicated that the financier who controls a 51% stake in Melrose Resources, Robert Adair, was not wedded to maintaining the company’s independence for the sake of it.

“Robert has always been very clear that he is open to considering any possibility for the company that would be value accretive for shareholders – he is open minded,” said Thomas.

However, he said Melrose could achieve significant growth as an independent.
In the six months to June, Melrose’s working interest production averaged 40,100 barrels oil equivalent daily, up 13% on the same period last year, helped by the start of production from the South Damas discovery, made in Egypt in February.

Melrose produced from 13 fields in the country.
Pre-tax profits increased to $26.2m from $19.8m.

Thomas said the company’s financial performance should be transformed by the start of production from the Kavarna and Kaliakra gas fields offshore Bulgaria later this year. These should allow the company to generate significant amounts of extra cash that it could use to step up exploration on its acreage in countries like Turkey and France.

Melrose was recently awarded two blocks off Romania. Directors are still waiting for official clearance for the acquisition of interests in two other offshore blocks from Sterling Resources, agreed in December 2008.

Thomas said Melrose had received a number of approaches for the onshore fields that it put up for sale in the US.

He believes the problems that BP has experienced in deep water in the Gulf of Mexico have led to increased interest in onshore assets.
Shares in Melrose closed up 10p at 309p.

(Source: Herald Scotland)


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