Valiant plans to join North Sea deal rush

Group Business Correspondent

Friday 7 September 2012

THE flurry of mergers and acquisitions in the North Sea is likely to continue after Valiant Petroleum hoisted a for sale sign.

PROMISING PROSPECTS: Valiant Petroleum could enjoy success as an independent, according to its founder.

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MARK WILLIAMSON

The Aim-listed oil and gas firm said it had started a strategic review in which the sale of the business will be one of the options considered.

Shares in Valiant Petroleum surged 4% following the announcement, leaving it with a capitalisation of around £195 million. That valued the 7.7% stake of its founder Peter Buchanan at £15m.

Kevin Lyon, who chairs Valiant and used to run the 3i investment business in central Scotland, has 80.000 shares, worth £384,000 at yesterday's closing price of 480p.Valiant posted an interim loss of $44m (£28m) yesterday. With assets in the North Sea, Norway and the Faroe Islands, Valiant suffered exploration reverses in the first half and found the cost of a key development project spiralling.An expert predicted more companies would follow Valiant's lead. Some smaller firms face problems accessing finance that could lead them into the arms of bigger players."The announcement by Valiant Petroleum is likely to usher in many strategic reviews in the sector," said Ally Rule, oil and gas partner at Ernst & Young.Mr Rule predicted that a number of "junior companies" would be courting larger, better-capitalised partners or acquirers.Big UK and overseas players have demonstrated their enthusiasm for the North Sea by acquiring firms or assets in recent months. Edinburgh-based Cairn Energy returned to the province by acquiring Agora Oil and Gas and Nautical Petroleum for a total of around £700m. The company was tipped as a possible bidder for Valiant's assets by analysts at Macquarie Bank. Agora is working with Valiant on several prospects. Macquarie said Enquest and Faroe Petroleum may also be interested in Valiant's assets. All three companies identified as potential bidders declined to comment.Cairn Energy's chief executive Simon Thomson signalled last week the company would not hurry to do more deals in the North Sea. He said the company had achieved critical mass there and did not need to buy production.Mr Buchanan, who founded Valiant in 2004 after stints at Premier Oil and Royal Bank of Scotland, conceded companies can launch strategic reviews because they have run out of options. However, he insisted that Valiant was well-funded and could enjoy a success as an independent. "It's very much a proper strategic review," Mr Buchanan told The Herald, adding: "We do have an organic growth story but alongside that we see opportunities to accelerate growth and maybe look at alternative geographies."Valiant said the options the review will cover may include "standalone organic growth alternatives, a strategic transaction such as a farm into, acquisition or farm down/disposal of existing assets or a corporate transaction such as a merger with or acquisition of a third party or a sale of the business". Based in Surrey with a satellite office in Aberdeen, Valiant charged $76m for unsuccessful exploration and historical licence cost write downs in the first half. It participated in four wells that failed to make commercial finds in the six months to June. The company said it now expects to pay $190-$200m to develop the combined Causeway and Fionn fields, compared with $175m previously, reflecting higher rig rates in 2013 and unusually poor weather impacting all offshore activities in 2012.Valiant expects to start production from Causeway later this year. It said production levels were in line with expectations in the first half and the guidance range for 2012 remains unchanged at an average 7,000 barrels oil per day to 8,500 bopd.l Industry leaders will consider how to address the skills shortage affecting the sector at a summit organised by Oil & Gas UK on September 19.

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Valiant plans to join North Sea deal rush

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