NORTH Sea-focused Deltic Energy has won backing from City grandee Michael Spencer in its attempt to fend off a hostile takeover bid.

Deltic last week spurned a £12m approach from another small oil and gas business, Reabold Resources, which its directors reckoned undervalued the company.

READ MORE: North Sea minnow in growth mode after exploration coup

Reabold said the combination of the two firms would create a business with an attractive and diversified portfolio while providing opportunities to cut costs.

However, Deltic unequivocally rejected the unsolicited approach from Reabold on valuation and strategic grounds.

Deltic yesterday published a letter it had received from Mr Spencer supporting the board’s position in his capacity as the leading shareholder in the firm, which changed its name from Cluff Natural Resources last month. Mr Spencer has a 16.8 per cent holding in Deltic via his IPGL business.

In the letter to Deltic, Mr Spencer said IPGL did not intend to accept the proposed offer by Reabold for the firm.

“This intention reflects our continuing support of Deltic’s management team, its technical capability, focused asset base with high impact potential and current strategy,” he wrote.

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The comment provides a fillip for the management team at Deltic, which reckons the company has good growth prospects despite the challenges posed by the coronavirus.

Some firms have announced plans to slash spending in the North Sea in response to the sharp fall in oil and gas prices triggered by the virus.

Led by Scots chartered accountant Graham Swindells, Deltic reckons it is in a good position to capitalise on opportunities that could arise amid the downturn.

The company had £13m cash in the bank on March 31. Mr Swindells has noted It has relatively low operating costs.

He recently underlined Deltic’s appetite for acquisitions.

READ MORE: North Sea firm targets acquisitions as slump opens 'window of opportunity'

Deltic said last week that the potential all share offer mooted by Reabold failed to reflect the value of the cash on its balance sheet let alone the potential of its exploration acreage.

The company achieved a coup last year when Royal Dutch Shell bought into acreage containing two big prospects. The firms plan to drill wells on both.

Reabold has reiterated its view that it would make sense to combine the two firms and has said it would seek to engage with Deltic’s shareholders.

Mr Spencer’s letter would appear to represent a setback for Reabold, which made no comment yesterday.

Under Takeover Code rules the company has until 5pm on August 12 to announce its firm intention to make a formal offer for Deltic Energy or walk away for the time being.

Led by oil and gas investment specialists Sachin Oza and Stephen Williams, Reabold describes itself as an investor in near term, high growth upstream oil and gas projects.

The company focuses on the appraisal stage of the oil and gas project investment cycle, rather than higher risk early stage exploration or more costly field development work.

Reabold has interests in the Moray Firth through its 34.9 per cent stake in Corallian Energy.

The Aim-listed firm also has a stake in the West Newton gas find near Hull, which it reckons could be the biggest made onshore in the UK for decades.

Mr Swindells succeeded North Sea pioneer Algy Cluff as chief executive of Cluff Natural Resources in 2018.

A former Guards officer, Mr Cluff played a part in the discovery of the huge Buchan field in the North Sea in 1975 then went into mining in Africa before founding Cluff Natural Resources.

READ MORE: North Sea pioneer returns to his military roots with new charity

Mr Spencer achieved renown for developing the ICAP broking business which became a major player in the market to match buyers and sellers of bonds, swaps and currencies.

He has served as treasurer of the Conservative party.

IPGL increased its holding in Cluff Natural Resources in February last year shortly after the company announced that Shell had bought into acreage containing the 100 million barrel oil equivalent Pensacola prospect.

Brent crude fell from around $70 per barrel in January to an 18-year-low of $15.98 per barrel in April.

It has risen to around $44/bbl after members of the Opec Plus exporter grouping agreed to record production cuts. Demand for oil and gas has increased following the easing of lockdown measures around the world.