parkmead offer 'too low': lochard investors

A consortium of investors represented by Cornhill Capital that holds around 20% of Lochard Energy’s stock has vowed not to accept Parkmead’s takeover offer for the cash-strapped explorer.

Last Thursday, Aberdeen-based Parkmead, which is led by North Sea entrepreneur Tom Cross, said it had agreed to acquire AIM-listed Lochard Energy in an all shares deal valuing the company at $21.82 million.

The UK junior’s primary asset is a 10% stake in Ithaca Energy’s Athena oil field, which produces around 10,000 barrels of oil equivalent per day.

Cornhill Capital said that its investor group “believes that the offer of 0.385 Parkmead shares for one Lochard Energy share materially undervalues the company”.

“Whilst the consortium fully agrees that the company needs to be run by an experienced and proven operator, the company has been consistently revenue generative from its 10% stake in the Athena field,” it added.

Lochard Energy’s finances have been weighed down in recent times by a $10.5 million settlement and costs liability from a legal case with Senergy over a well commitment, as well as by repayments on a $28 million loan with Gemini Oil & Gas inked by former managers.

However, the consortium pointed out that the Senergy settlement has now been paid in full along with the majority of the Gemini loan thanks to revenues from the Athena field.

“Repayments to Gemini should now be at [only] 20% of gross revenues, further increasing Lochard Energy's cash position and making it a profitable entity,” the consortium said.

Lochard Energy shares were trading down 7.9% at £0.04 on Thursday afternoon, while Parkmead's stock was up 1% at £0.12.

Lochard Energy’s board launched a formal sales process last September after deciding that its entire asset portfolio would garner more interest than a 2011 bid to farm down its Thunderball gas prospect and Moby discovery.

In January the explorer warned it would likely lose operatorship of Thunderball as it could not afford to drill a commitment well at the gas play.

The Cornhill Capital-led shareholder group opposing the offer comprises: Cornhill private clients (2.74%); Peter Ross (2.61%); Gardner Marketing PTY (Haydn Gardner) (5.86%); and Barby RJ & Associated Entities (Roger Barby) (9.16%).