Venture Production Rejects Centrica's Takeover Offer
Venture Production notes the announcement by Centrica of an unsolicited final offer for Venture of 845p per ordinary share. Following a Board meeting, and having consulted its financial advisers, the Board has unanimously concluded the offer is not in the best interests of shareholders and should be rejected by shareholders.
The Board has concluded that Centrica's offer substantially undervalues Venture given its near and long term prospects and the strategic position and high quality of its UK gas reserves and resources:
- is the leading independent gas producer in the North Sea
- has a large portfolio of assets with material upside potential
- has a sustained track record of delivering growth and value
- has the operational and technical expertise needed to exploit the North Sea opportunity set
- has the financial strength needed to exploit both existing portfolio and strategic opportunities
Leading independent gas producer in the North Sea
Venture is the leading independent gas producer in the North Sea and the ninth largest holder of UK North Sea gas reserves. Venture is forecast to be the tenth largest gas producer in the UK North Sea in 2009 and the only company within the top 10 whose production is forecast to rise over the next three years. In the southern North Sea, Venture has proved and probable gas reserves of approximately 1.1 Tcfe (approximately 180 MMboe) with substantial additional potential resources totaling approximately 2.7 Tcfe (approximately 450 MMboe) on an unrisked basis.
Venture's gas reserves are:
- Strategically located close to the UK market, the third largest OECD natural gas market and one which is increasingly dependent on imports. As overall North Sea production continues to decline, Venture's growing gas reserves are expected to become more strategic due to their low political risk and security of energy supply considerations.
- Largely uncontracted, enabling Venture to capture further value from the UK's increasing reliance on gas imports and the anticipated strengthening of energy prices as reflected in forward markets.
- Geographically well positioned to supply the Continental European gas markets as well as the UK.
Opportunistic approach by Centrica that undervalues Venture
The Board of Venture believes that Centrica's initial acquisition of shares and subsequent offer are opportunistic.
- Its initial acquisition in March was made at a time of significant weakness in both the equity and energy markets. Since that time, the share prices of Venture's peers in the UK E&P sector have risen substantially.
- In the last budget, the UK Government improved the tax regime for the development of small fields in the North Sea and this bodes well for the future fiscal stability of the region for upstream developers.
- The value per barrel implied in Centrica’s offer is materially below the average achieved in the sale of comparable large North Sea asset portfolios in recent years.
The Board believes that Venture's high quality gas reserves and resources and strong operational capability are of significant strategic value to Centrica. This strategic value is clearly not reflected in the price that Centrica has offered.
Venture advises shareholders to reject Centrica's offer
Mike Wagstaff, Chief Executive, Venture Production, said, "We are the leading independent gas producer in the North Sea. In no way does this offer recognize the strategic position and high quality of our UK gas reserves and resources for which the markets have clearly and consistently established significantly higher values across a number of recent transactions. Our strong financial position enables us to exploit both our existing strategic portfolio and future acquisition opportunities."
Venture shareholders should note that Centrica's offer is final and will not be increased, except that Centrica reserves the right to revise and/or increase its offer if a competitive situation arises. Should Centrica therefore not satisfy the minimum acceptance condition under its offer, the offer will lapse and Centrica cannot make a further offer for 12 months without the consent of the Takeover Panel.
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