Takeover talk helps Tullow hit record highTools Print Email...

Takeover talk helps Tullow hit record high
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Go Wednesday October 10 2007


SHARES in Tullow Oil surged to a new record high on the stock market yesterday as dealers speculated on a new wave of takeovers in the oil sector.


Speculation was fuelled after shares in Burren Energy jumped 26pc in London following its rejection of a £1.5bn takeover bid, news which boosted other oil stocks including Tullow Oil, which jumped almost 3pc.

Burren Energy had earlier received an unsolicited offer worth £1.5bn from the Italian company ENI but immediately issued a statement saying the offer did not come close to putting a value on its business.

The Burren announcement overshadowed Tullow's news from Ghana stating that it would not be testing its latest exploration well in the shallow water Tano offshore license block. Tullow has already made a significant discovery, called Mahogany, in the deepwater part of the license.

In its own statement Burren confirmed that it has received a number of approaches in relation to possible offers at up to 1100p per share.

"The Board has rejected these conditional proposals on the grounds that they fail, by a significant margin, to recognise the value which the board strongly believes is inherent in the company," the Burren statement said.

It added that Burren felt "well positioned" to deliver value for shareholders through the implementation of its focused strategy of finding, acquiring, developing and exploiting oil and gas reserves in emerging markets.

Burren stock rose by 26pc in the wake of the news, with other oil stocks including Tullow, also rising sharply on the back of speculation that the ENI bid is the start of a new round of consolidation in the sector. Tullow itself has a market worth of almost €6.3bn.

In Dublin, Tullow's stock was up 20c at a new record high of €8.73 despite the news that the Ghanaian well had been abandoned. Tullow said that efforts to appraise a shallow-water discovery in the Tano Block offshore Ghana have not been successful.

It added that the 1N-3X appraisal well, in which Tullow has a 31.5pc stake, has been plugged and abandoned as logging indicated that reservoir permeability was poor and commercial flow rates would not be attained.

Davy Stockbrokers said the target was about 40bn cubic feet of gas. Other targets remain on the block but no guidance was given as to any follow-up drilling.

The broker added that the impact on risked valuations is minimal with the whole shallow-water block valued at just 2p per share. Tullow's focus is now likely to be firmly on the deep-water Ghanaian blocks where two discoveries earlier this year point to a major new oil discovery.