Rumours doing the rounds with regard to Sinopec bid for Afren.
Sinopec are already involved in Kurdistan – and with politics a tad sensitive at present – Afren could offer them a more subtle way to greater involvement in the region.
Afren have yet to reveal the results/tests on Simrit-2 and 3 but many believe that these numbers (when they arrive) will be very impressive. The close proximity to Shaikan makes the licence immediately desireable for the Chinese. The data that they would gain from this licence could pave the way for a larger plan to acquire GKP’s assets.
Afren are not light on diversity either. The portfolio has hot regions like Kenya in there too which the chinese would be keen to get a foot hold in.
All in all – Afren potentially ticks many boxes and with Kurd assets under priced at present – it would be a great buy for Sinopec.
Whether they encounter competition or counter bidding or whether they bid at all is anyones guess. But 250p looks cheap based on what they would be gaining.
At 153p a share – Afren looks well underpinned based on recent ops and trading update with very little upside for exploration success priced in.
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By Ben Harrington7:50PM GMT 24 Jan 2013
Comment:
One tale doing the rounds is that Chinese oil company Sinopec is keen on acquiring Afren, the FTSE 250-listed oil explorer with operations in Africa and the Kurdistan region of Iraq.
Afren shares leapt 10pc on Wednesday on speculation the company will either unveil positive drilling results from its Papai well in Kenya or announce a takeover offer from a potential bidder.
Traders said Sinopec – which already has a major presence in West African oil and gas exploration following its £4.5bn acquisition of Aim-listed Addax Petroleum in 2009 – is rumoured to be interested in paying between 215p and 250p a share for Afren, down 0.6 to 151.4p.
via FTSE 100 surges 1.1pc to fresh four-and-a-half year high – Telegraph.
Hi HUB,
Can you give us your opinion on the extra funding request at the court case involving GKP.
To use a texas hold’em poker term, I think the first 4 cards are down and GKP has a full house. We’ve just re-raised and Excalibur only have a pair. What are they going to do? Thy’re already pretty much all in.
Cheers,
Oli
Oli,
I wish it was as simple as that. Unfortunately I fear that the money is irrelevant. We can only guess to why a 3rd party outfit would spend so much on such a weak case. But when you have a potential company worth 10 billion+ priced on the market at just 1.8 billion, it becomes pretty evident that $16mln is small fry.
So lets take a look at what their £16mln has bought them…
1. Since 2010 (dec) GKP have had a black litigation cloud hanging over them)
2. FTSE ambitions have been halted due to the uncertainty over the case
3. The above combined have delivered higher dilution to shareholders and made financing more expensive and harder to come by
4. In a region like Iraq politics can turn very fast. An O&G law would have derisked GKP hugely. This case has given any interested or related parties the ability to keep GKP in a tight range. That said – the rise to 460p last year must have had a few sweating.
All in all – spending £16mln to gain such a grip on a company looks like money well spent.
And the best bit is – if they have hedged their bets and have bought GKP stock over the last 24months at an average of say 160p x 10mln shares = £16mln.
Then should the case fail and GKP’s sp race back to nearer some broker targets – say 320p. Well, there you go. That’s £32mln and a net profit of £16mln.
I don’t think the backers will be losing any money over this case – another £8.5mln will not come as a surprise as after all – they are the ones that appear to have stretched this out to double the estimates time.
They would not have done this if they were trying to save on money.
Thanks HUB, I appreciate the comprehensive reply.
Oli