Monday, 15 December 2014
Anthony Barich
NIDO Petroleum managing director Phil Byrne sees plenty more assets up for grabs in the near term with plummeting oil prices to correct valuations and shake companies out of their comfort zones to boost M&A activity in Southeast Asia.
Galoc FPSO and rig.
Speaking to Energy News after his company offered to pay $US108 million ($A131 million) cash for Otto Energy’s 33% stake in the Galoc field in the Philippines to up its production to just over 4000 barrels per day, Byrne said the oil slump may shake protective executives out of their comfort zones.
It is all part of Nido’s strategy to grow its production to 20,000bpd in about three years by acquiring more production.
So, on the hunt for more Southeast Asian assets, Byrne believes there are plenty out there but they are overvalued, mainly because the companies that hold them believe they’re worth more than they are – but that will change soon enough.
“Given where the oil price is, I think it’s going to be even harder for a lot of these companies to execute their plans and we see it as a very good time to be looking at assets,” Byrne told Energy News.
“There are some assets available, but the actual valuation of the assets isn’t really reflecting the oil price. It’s going to take another 3-4 months for that to really sink in.”
However, Byrne believes this has less to do with the cost of the assets and more to do with the state of the company holding those assets who is not only struggling with the oil prices, but also thinks the assets are worth more than they really are.
This is the case among both juniors and majors alike.
“In this price environment, what will also happen is the medium and larger players in Southeast Asia will divest some of their more marginal assets which would fit us,” Byrne said.
“We’re showing the market by our actions what we want to do.
“When you have a high oil price it’s hard sometimes to get people out of their comfort zone, but at the moment people will be more amenable to M&A activity.”
Nido was taken over by Thai refiner Bangchak Petroleum which wants to diversify across the upstream space, but the deal still allowed Nido to remain an ASX-listed company as the junior wanted to conduct more merger activity (and it has the luxury of having script on the ASX if it sees fit, rather than just paying cash).
Bangchak, which has an 81.41% stake in Nido, also committed to a $120 million revolving credit facility for the Australian-listed junior.
Under the terms of the sale and purchase agreement for Otto’s Galoc production, Nido will pay Otto $108 million based on the value of the Galoc Production Company as at July 1, 2014. It will also pay the company a $10.8 million deposit to assume all production rights and liabilities associated with Otto’s 33% working interest (including abandonment costs) with effect from July 1, 2014.
The transaction is dependent on Otto shareholder approval.
Nido will fund the acquisition through a combination of existing cash reserves and debt, with Bangchak committing to providing Nido a revolving debt facility on an arm’s length basis in order to provide Otto shareholders certainty of funding for the offer for the 33%.
“Acquiring Otto’s stake in Galoc is a logical growth opportunity for Nido and one that fits neatly with the strategy Bangchak communicated upon taking majority ownership of the company earlier this year,” Byrne said.
“Nido’s increased participating interest and appointment as operator will also put the company in a controlling position as the Joint Venture moves forward towards a further potential expansion of the Galoc oil field.
“We look forward to building on our role as a consolidator in the Southeast Asian oil and gas sector.”
Bangchak President Vichien Usanachote said Nido had provided his company with a platform to grow its upstream capability.
“This is therefore the initial step in using Nido as a vehicle to aggregate production and exploration opportunities in the region,” Usanachote said.
“I expect that this will be the first of many opportunities that we will capture going forward.”
NDO Price at posting:
2.7¢ Sentiment: Hold Disclosure: Held
