UK-based natural gas explorer in Africa, Ophir Energy (Ophir) has turned into a takeover target for producers such as Royal Dutch Shell Plc (RDSA) as Ophir’s limited cash has hampered its ability to develop finds on its own
According to a Bloomberg report, Ophir’s shares have fallen 27 per cent from its high in September 2013 after the company indicated it would be short of money needed for drilling projects this year and BG Group, its partner in Tanzania, opted to slow development of a liquefied natural gas venture there.
The drop also fuelled as shareholders Mittal Investments Sarl and Och-Ziff Capital Management Group sold shares and left the US$2.8bn explorer trading last week at 3.2 times its net assets, the lowest in almost a year, according to data compiled by Bloomberg.
Royal Dutch Shell has predicted liquefied natural gas demand will register a fourfold increase by 2020, from what it was in 2000.
The Bloomberg report said that Ophir has offered buyers the chance to gain a foothold in Africa with access to assets that have the potential to supply enough fuel for the continent for at least a decade.
The company could attract Shell, which lost a bidding war last year for East African explorer Cove Energy. Chinese state-owned firm Cnooc, which has projects in Uganda, and China Petrochemical Corp, the refiner known as Sinopec Group, could also be interested.
London-based fund manager Will Riley, who oversees Ophir shares at Guinness Atkinson said, “It’s going to be difficult for Ophir to develop its assets on its own. The stock looks reasonably valued relative to the assets it has. They are a logical takeover candidate.”
Ophir CEO Nick Cooper has, however, declined to comment on the potential for the company to become a takeover target.
Cooper, a former BG geophysicist and Goldman Sachs Group banker, has been focusing on gas projects off Equatorial Guinea and Tanzania, where Ophir plans to produce LNG for export.
