Etablissements Maurel & Prom S.A. - Possible Offer for Amerisur Resources plc

Source Press Release
Company Maurel & Prom SAAmerisur Resources Plc 
Tags Corporate Deals, Deals, Upstream Activities
Date July 22, 2019

Etablissements Maurel & Prom S.A. ("M&P", the "Company"), the Paris (Euronext) listed exploration and production company, notes the announcement made by Amerisur Resources plc ("Amerisur") on 19 July 2019 in which it disclosed that it had received an approach regarding a possible offer for the company and had launched a strategic review and formal sale process under the Code.

On 18 July 2019, M&P made an initial proposal to the Board of Amerisur regarding a possible offer to acquire the entire issued and to be issued share capital of Amerisur (the "Possible Offer") for a combination of M&P shares and cash. M&P has over recent days engaged with certain major shareholders in Amerisur to discuss the Possible Offer.

Possible Offer

M&P has written to the Board of Amerisur indicating that the Possible Offer would be to acquire the entire issued and to be issued ordinary share capital of Amerisur for a consideration of cash and M&P shares valuing each share in Amerisur at 17.0 pence. The consideration was to comprise 12.5 pence in cash, and new shares in M&P with a value of 4.5 pence, per Amerisur share (the "Possible Offer Price"). The announcement of this Possible Offer follows the decision announced by Amerisur on 19 July to conduct a formal sale process for the company. M&P is a participant in the formal sale process.

For illustrative purposes, based on prices as of market close on 17 July 2019 (being the last trading day prior to the date of M&P's approach) and a Possible Offer Price valuing each Amerisur share at 17.0 pence, this implied an exchange ratio of 0.0171 M&P shares (and 12.5 pence in cash) for each Amerisur share. The exchange ratio referred to in this announcement is the implied exchange ratio as at 17 July 2019, based on M&P's proposal to the Board of Amerisur, which is provided for information purposes only and is subject to change. M&P shall not be bound by this exchange ratio.

The Possible Offer Price implies an equity value of US$257mm2, and represents a 41.7% premium to Amerisur's share price of 12.0 pence on 17 July 2019, as well as a 38.3% premium to Amerisur's 30-day VWAP of 12.3 pence.

This structure would allow Amerisur's shareholders to realise immediate cash as well as having the opportunity to retain exposure to value creation from the combined entity, with the benefit of having a platform of significantly greater scale, as well as experienced and focused management across the entire E&P value chain, from exploration, development, production through to field optimisation.

Notwithstanding this announcement, the formal sale process, including the dispensations granted by the Takeover Panel in connection therewith (as detailed in the announcement by Amerisur on 19 July), shall continue.

Offer rationale

M&P sees considerable benefit to shareholders from a combination and believes that the enlarged group would offer significant value upside for both Amerisur's and M&P's shareholders. The combination would result in a balanced portfolio of producing assets, with a wide range of high impact exploration and development opportunities across Latin America and Africa. This would allow value adding capital allocation decisions, benefiting from M&P's access to both flexible and low cost debt and to capital markets.

M&P is committed to Colombia, having been present in the region since 2005, and has successfully demonstrated its ability to unlock value in the country. Between 2005 and 2013, M&P discovered, developed and monetised a number of assets across multiple basins in-country, generating US$909mm in cash proceeds. As of today, M&P maintains its regional headquarters for Latin America in Bogota, and holds a 50% operated interest in M&P Colombia, which owns two exploration licences in the Eastern Cordillera basin (the COR-15 and Muisca blocks).

M&P believes that the proposed combination would enable M&P to leverage its operational expertise on Amerisur's promising portfolio of development and exploration opportunities. M&P has proved itself as a successful explorer and developer of oil and gas assets across a variety of terrains and geological settings across Latin America and Africa, and has accumulated considerable in-house expertise on all aspects of the E&P value chain:

·      Exploration: seasoned exploration team with proven experience across multiple basins globally, especially in Africa and Latin America;

·      Drilling: over 550 wells drilled since 2003 by in-house drilling subsidiary Caroil, of which more than 370 were on fields operated by M&P;

·      Field development: track record of successful greenfield developments in Congo (ramping up to c.60,000 bpd operated oil capacity on the M'boundi field between 2001 and 2006), Gabon (currently operating c.25,000 bpd of oil on the Ezanga licence) and Colombia (discovery made on the Ocelote field in March 2007, production ramped up to 9,700 bopd with gross 2P reserves of 52mm barrels by January 2009); redevelopments in Nigeria (oil and gas) and Tanzania (gas);

·      Production optimisation: experience in enhanced oil recovery techniques, including water injection in heterogeneous reservoirs on the Ezanga licence in Gabon and on the San Francisco and Balcon fields in Colombia;

·      Marketing: maximising value creation per barrel via in-house marketing of crude oil production through fully-owned subsidiary M&P Trading.

M&P would be looking to build on this successful experience by leveraging Amerisur's technical teams in Colombia and taking advantage of M&P's strong financial resources to accelerate the progression of Amerisur's asset base, and in particular its exploration portfolio.

M&P is able to bring sources of low cost capital to fund portfolio progression and believes this would enable the combined business to enhance shareholder returns through appropriate financing of the capital structure. In addition, the enlarged group should have an increased ability to source a larger and broader range of institutional equity investment. M&P is a dividend paying company and paid a dividend of US$9mm in June 2019 with respect to FY 2018.

Shareholding and listing considerations

Since the completion of the partial takeover in 2017, M&P has been the international development platform of Indonesian national oil company PT Pertamina (Persero) ("Pertamina"), through its subsidiary PT  Pertamina Internasional Eksplorasi Dan Produksi ("PIEP"). Thanks to the backing of this supportive shareholder and its enhanced financial profile, M&P has been able to launch a new phase of growth as the listed development platform of  Pertamina, with the successful announcement of three M&A deals in 2018 for a total consideration in excess of US$200mm.

M&P believes that a combination with Amerisur fits this growth strategy, and would offer significant value upside to both M&P's and Amerisur's shareholders. The combination would allow capital allocation decisions on a broader portfolio, with a view to maximise shareholder returns via access to low cost debt finance thanks to the backing of Pertamina and access to capital markets. M&P aims at sharing the value creation of this growth strategy with all of its shareholders, as demonstrated by the resumption of a dividend payment this year.

If the Possible Offer includes a share component and is successful, it is M&P's intention to seek a listing on the standard segment of the London Stock Exchange's Main Market within 3-6 months, subject to: (i) satisfying the relevant eligibility criteria; (ii) obtaining any necessary approvals; and (iii) market and trading conditions (including any regulatory changes due to Brexit). Such a listing would enable all of Amerisur's current shareholders to retain shares in a UK listed entity, with a free float and daily liquidity (in absolute terms) significantly in excess of Amerisur's current free float and daily liquidity.

Offer funding

It is M&P's intention that the cash component of the Possible Offer would be funded by M&P's existing cash resources and available undrawn facilities.

Pre-conditions to and terms of the Possible Offer

An announcement of a firm intention to make an offer by M&P under Rule 2.7 of the Code remains conditional on satisfactory completion of customary due diligence requiring the engagement of Amerisur management. M&P reserves the right to waive this pre-condition at any time at its sole discretion, but notes that there can be no certainty that a formal offer will be made, even if the pre-condition is satisfied or waived.

For the purposes of Rule 2.5(a) of the Code, M&P reserves the right to make an offer on different and potentially less favourable terms than those set out in this announcement at any time (a) with the consent or recommendation of the Amerisur board, (b) if a third party announces (after the date of this announcement) a firm intention to make an offer for Amerisur or a possible offer, (c) following the announcement by Amerisur of a whitewash transaction under the Code, or (d) through a reduction in consideration by the amount of any dividend, return of value or other distribution which is announced, declared, made or paid by Amerisur after the date of this announcement.

M&P reserves the right to adjust the form and/or mix of consideration of any offer.

Any offer would be subject to any requisite anti-trust or regulatory approvals and other customary conditions.

Information on M&P

M&P is an oil and gas exploration and production company listed on the regulated market of Euronext in Paris. M&P has more than 650 employees worldwide overseeing the Company's 190 mmboe working interest 2P reserves3 (as of 31 December 2018) and working interest production of 22,934 boepd4 (FY 2018), and has been backed by Indonesian oil corporation Pertamina since 2017 (currently holding 70.75% of M&P's shares).

The Company has extensive technical and operational experience in both gas and oil projects. Over the past 20 years, M&P has made several significant discoveries, particularly in the Congo Basin, and has successfully participated as an operator in the development or redevelopment of a large number of assets in Congo, Colombia, Gabon, Tanzania, and Nigeria.

Today, the Company has a portfolio of high-potential assets focused on Africa and Latin America, consisting of both producing assets (Gabon, Tanzania, and Venezuela) and opportunities currently in the exploration or appraisal phase (Gabon, Namibia, Colombia, France, Italy, and Canada). As of July 2019, M&P is in the final phase of completion of an acquisition in Angola, which was announced in October 2018.

The Company also holds a 20.46% stake in Seplat, one of Nigeria's main operators, that is listed on the London (Main Market of the London Stock Exchange) and Lagos (Nigerian Stock Exchange) stock exchanges.

M&P constantly strives to meet and improve the industry's strictest standards in terms of health, safety and environmental protection. The Company also relies on constant dialogue with host countries and local communities to ensure long-term commitment from stakeholders.

Notes:

1 Based on GBP/EUR FX rate of 1.108 as of 17 July 2019

2 Based on GBP/USD FX rate of 1.243 as of 17 July 2019 and 1,215,467,768 Amerisur shares outstanding

3 286 mmboe including 20.46% of Seplat's 2P reserves as of 31 December 2018

4 33,137 boepd including 20.46% of Seplat's working interest production for FY 2018

Source: EvaluateEnergy® ©2019 EvaluateEnergy Ltd