Takeover activity continues in the AIM oil and gas sector

Following the acquisition of North Sea explorer Encore Oil by Premier Oil in October 2011, yesterday it was the turn of offshore Cameroon focused Bowleven (BLVN) to announce it was in talks with Dragon oil. The shares rose over 60 percent to 120p after haven fallen from over £4 in 2011 to a 52 week low of 62p in December on funding concerns for its exploration programme. At the current share price Bowleven is valued at £354 million, having around £100 million of cash after a fund raising in October 2011.

Dragon Oil, which is listed in both the UK and Ireland and 51 percent owned by the Emirates National oil company, said it is only in the early stages of deciding whether to launch a bid for BowLeven, and said that confirmation of its nascent interest does not constitute an announcement of a firm intention to make an offer under Rule 2.7 of the City Code on Takeovers and Mergers. 

Both Encore and Bowleven received offers when trading close to their lows after the steep sell offs in 2011 and it looks likely that others will share their fate given the difficulties in raising finance at the current time. Equity finance is only available at a steep discount heavily diluting existing shareholders and debt finance has been curtailed by conservative lending policies by banks. Those with cash like Dragon ($1.5 billion) are taking out weaker fellow oil and gas whilst share prices remain subdued. Many of the small cap investors favourites are being removed from the market and it is probably not that long before Rockhopper, Xcite Energy, Gulf Keystone, Chariot, Range Resources and others are taken out by predators.

Comments

[Buster21]

GKP / CHAR / BPC all to be taken out within 6 months IMO.

GLA,
Buster