Salamander Energy shareholders left disappointed by Ophir Energy offer

Shares in Salamander Energy, the South East Asia focused oil and gas explorer, fell 17% on Tuesday when it was announced that a consortium led by Cepsa were walking away from a possible deal. This left the way clear for an all paper offer from Africa focused explorer, Ophir Energy, which today proposed 0.5719 Ophir shares for each Salamander share. At Ophir’s current price of £1.69, it means the offer is worth 96p a share compared with the potential 145p which was previously on offer from Cepsa. The offer is conditional on Salamander cancelling its deal with Malaysia’s Sona Petroleum Bhd to sell 40 percent of two oil and gas blocks in the Gulf of Thailand.

Salamander is currently trading up 1% at 91p with Ophir Energy down 6% at £1.69. In addition to the offer for Salamander, Ophir also announced a series of poor drilling results in Tanzania which didn’t help matters.

The RNS stated ” The Tende-1 well was drilled in East Pande by the Deepsea Metro I drillship in a water depth of  781m to a total depth of 4,153m targeting the Cretaceous-aged Tende prospect. Although gas traces were encountered in the upper strata of the primary objective, wireline logs confirmed that no moveable hydrocarbons were present in this prospect. In the secondary Tikiti objective, the Tende-1 well encountered a gas bearing sandstone. The Company will evaluate the wider impact of this find as it integrates the well results into its understanding of the remaining prospects in the East Pande block. Following the Tende-1 well, the Deepsea Metro I drillship moved to Block 7 where the Mkuki-1 well was drilled to a total depth of 3,204m. The well targeted a Tertiary-aged stratigraphic prospect located in water depths of 1,648m and encountered a high quality sandstone sequence, but no hydrocarbons were present.”

The deal looks like a good buy for Ophir at this price and diversifies its portfolio with a producing asset offshore Thailand and derisks its reliance on its African portfolio. The deal demonstrates that with so many assets for sale around the world, prices being paid are far from the sort of levels seen a few years ago when the likes of Cove Energy were the subject of bidding wars at high multiples of resources.

Contrarian Investor UK

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