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Worldview’s £6.4mln Petroceltic bid deemed ‘deeply insulting'

Petroceltic’s “uber-aggressive Russian activist shareholder” is not likely to get the support other shareholders, according to Cenkos analyst Ashley Kelty.
Worldview’s £6.4mln Petroceltic bid deemed ‘deeply insulting'
News of the low bid knocked around 55% off Petroceltic’s share price.

Worldview’s low-ball takeover approach for Petroceltic (LON:PCI) is ‘deeply insulting’ to many of the AIM quoted company’s shareholders, according to City broker Cenkos.

At £6.4mln, or 3p per share, the offer is some 83% lower than Petroceltic’s closing price on Thursday.

In a brief holding statement Petroceltic urged shareholders to take no action, and said it intended to make a further statement in due course. News of the low bid knocked around 55% off Petroceltic’s share price in Friday’s early deals, with the troubled oil and gas firm trading at 8p just after 9:00am.

The approach from Worldview comes in the guise of Sunny Hill Ltd, which is wholly owned by the Worldview Economic Recovery Fund.

Analyst Ashley Kelty describes Worldview as Petroceltic’s “uber-aggressive Russian activist shareholder” - it owns 29.6% of the company - but, he highlighted that 90% or more of all the company’s shareholders would have to accept the offer for it to succeed.

“We anticipate that (non-Russian) shareholders will see this deal as deeply insulting as it is clear that the value of the Ain Tsila field is certainly far greater than 3p/sh - even if sold in a fire sale,” Kelty said in a note.

“With the current price being 18p, not many holders are likely to be willing to hand over any value to Worldview.”

BMO Capital analyst David Round, meanwhile, pointed out that by his valuation Petroceltic’s assets are worth some 44p per share.

“In our view, this [offer] materially undervalues Petroceltic’s assets and future potential, even taking into consideration Petroceltic’s distressed financial position and reduced bargaining power,” Round said.

Petroceltic has in recent weeks been working to resolve a debt problem.

It owes around $218mln and has needed support from its lenders whilst it has sought new financing and explored possibilities for asset sales.

On Monday, Petroceltic told investors that it had received a further waiver from its lenders regarding repayments under its senior bank facility. The waiver has been extended to March 4. It is conditional upon Petroceltic making satisfactory progress with its ongoing strategic review.

Additionally, Petroceltic said the lenders have indicated willingness to consider further waivers if they are needed to continue the strategic review process.

Worldview, via the Sunny Hill statement this morning, said: “The directors of Sunny Hill believe that the value of the equity in Petroceltic is close to zero, given the parlous financial position of the company.

“However, as an incentive to Petroceltic shareholders to accept the offer, in order to allow Sunny Hill and Worldview to accelerate addressing the company's indebtedness issues, Sunny Hill is prepared to offer 3 pence, in cash, per Petroceltic Share.”

Angelo Moskov, Worldview chief executive and a director of Sunny Hill, said: "Although Petroceltic's assets may, arguably, have long term potential, if both the right capital structure and management team were in place, in light of the current oil price and Petroceltic's sizeable level of indebtedness, its negative cash flow generation and worsening financial position, we believe that the Company requires a significant restructuring of both its operations and balance sheet.”

He added: “Our offer provides Petroceltic shareholders with an all cash exit from a high risk, distressed investment, against the background of unprecedented uncertainty in the oil and gas sector."

Worldview has previously failed in attempts to sack Petroceltic’s management as it failed to get sufficient support from Dublin based oil company’s other shareholders.

According to Cenkos analyst Kelty expects the Worldview bid to be roundly rejected, but he notes that it represents another unwelcome distraction for Petroceltic.

He added: “Worldview has been instrumental in destroying much of the value in PCI with its endless agitating distracting management from actually focussing on moving the business forward,” Kelty said.


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