Oil exploration group Burren Energy said today it had conditionally agreed a $35 million deal with the Republic of Congo over the Kouilou area and M'Boundi field, knocking its shares.
The London-listed oil and gas explorer said it would sell 10 per cent of its current 35 per cent stake in the Kouilou Production Sharing Agreement (PSA) to the state-owned oil firm SNPC, and analysts said the price looked cheap.
Shares in Burren had fallen 8.9 per cent by mid-morning, making it the biggest loser among midcaps and valuing the group at just over 1 billion pounds.
"We believe that the partners are allowing the government to buy a stake in M'Boundi relatively cheaply, in return for an extension of the licence terms now," analysts at Numis Securities said in a research note.
"It remains to be seen whether the uplift in reserves will offset Burren's reduced interest in the field," they added.
The deal requires ratification by the Congolese parliament and completion is expected later this year, said Burren. It will be paid half in cash and half as a rebate on oil profit, it added.
"In addition, it is expected that parliamentary approval for the PSA governing the La Noumbi permit area, which has been awaited for some time, will be procured, allowing exploration activity to commence around the end of 2005 or beginning of 2006," Burren added in a statement.