takeover on the horizon

Takeover on the Horizon

MATT CHAMBERS THE AUSTRALIAN APRIL 25, 2014 12:00AM


A FLURRY of deals in Papua New Guinea’s onshore gas resources could continue, with Horizon Oil declaring it is ­mulling a takeover offer from an undisclosed buyer.

Fellow mid-tier energy player Roc Oil, a partner of Horizon in the Beibu Gulf project in China, could also be drawn into the offer.

Both Horizon and Roc went into a trading halt yesterday following reports Horizon was in takeover discussions.

Horizon said the trading halt was required “in connection with a potential material control transaction which is still under consideration by the company”.

Roc, which is a smaller company by market value than Horizon, said it was considering a “possible transaction”.

According to a recent valuation by Ord Minnett analyst John Young, Horizon’s most valuable assets are its suite of condensate and gas assets in PNG. Mr Young, who has a target price of 53c on Horizon (giving it a value of $823 million) values the PNG assets at $356m and Horizon’s stake in Beibu at $315m.

Horizon has said the assets may be able to feed an LNG project in PNG, where Total and Oil Search have recently signed deals to enter the undeveloped Elk and Antelope onshore fields.

Horizon shares last traded at 37c after jumping 3.5c, or 10 per cent, in the last half-hour of trading on Wednesday.

Roc shares slipped by less than half a per cent in the same period to finish at 45.5c.

Both stocks went into a trading halt before markets opened yesterday.

Roc’s $313m market value means it would struggle to alone make a decent change of control offer for Horizon, which has a market of $436m. This could mean a complex bid for Horizon by a third party is being contemplated that involves a side deal with Roc on the Beibu project, which is controlled by China ­National Offshore Oil Corporation and has been in production for a year.

Horizon owns 27 per cent of Beibu and Roc owns 19.6 per cent.

At the end of last year, Roc had $US65m of cash and $US66m of undrawn debt.

Managing director Alan Linn has recently said the company has the capacity to pursue strategic growth opportunities.

In its annual report, released after Roc went into a halt, Mr Linn said the company wanted to build an exploration portfolio with a balanced mix of mature and emerging plays near existing infrastructure.

“While exploration is important for organic value growth, the time taken to discover, develop and monetise assets can be significant,” he said.