Tullow Oil has agreed to buy rival exploration group Hardman Resources for 1.47 billion Australian dollars (€865 million), doubling the group's exploration pipeline and giving it greater access to development sites in Uganda and elsewhere in Africa.
Under the terms of the deal, which has been recommended by Hardman's board, Tullow will pay A$2.02 for each Hardman share - a 54.2 per cent premium over the Australian group's closing price last week.
The company, which is listed on Dublin's Iseq as well as in London, is also offering a share alternative of just over a fifth of a Tullow share for each Hardman share, up to a maximum of 65 million new Tullow shares.
The takeover, which is expected to be completed within the next three months, was welcomed by analysts and executives alike. Tullow chief executive Aidan Heavey described the acquisition as a "perfect strategic fit," while analysts said it would increase the group's reserves by 25 per cent and enhance its potential for future discoveries, particularly in Africa.
Completion of the deal will increase Tullow's total production by 6,000 barrels a day immediately, thanks to Hardman's Chinghetti oil field in Mauritania - its only producing resource.
"Hardman has a very good portfolio of assets in very early stages of development and exploration," said Mr Heavey. "The acquisition gives access to a much longer production portfolio and gives us control of many more areas."
Shares in Tullow slipped yesterday despite the positive view of the acquisition by analysts, with murmurings that the price may have been a little on the high side prompting the decline.
However, most commentators were upbeat about the group's prospects for substantial discoveries in Uganda, the likelihood of which has been boosted by yesterday's acquisition announcement.
Hardman, which is listed on London's Aim as well as the Australian Stock Exchange, had profit before tax of A$31.1 million in the six months to the end of June, and net assets of A$542 million at the end of the period.
It has projects in six countries, including a major presence in Mauritania, which includes the Chinghetti oil field. The other interests are in Tanzania, Suriname, Guyana and the Falkland Islands.
Tullow has a portfolio of licences in 17 countries, including a previously agreed partnership with Hardman in Uganda.
To date, the partnership has produced three successful exploration wells. Mr Heavey said the group currently had only explored about 6 per cent of the possible acreage in Uganda and was upbeat on future developments in the region.
Combined, the two companies will have more than 100 licences spread across 21 countries, with Africa accounting for more than 45 per cent of the total.
Mr Heavey dismissed the recent declines in the price of oil, saying it wouldn't have any impact on the group's finances. He also said he believed the price of oil would rise again in the long term.
