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Rockhopper Exploration’s £29mln MOG takeover adds imminent well catalyst

Published: 09:33 23 May 2014 BST

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Rockhopper Exploration (LON:RKH) has struck a deal to buy Mediterranean Oil & Gas (LON:MOG) for £29.3mln.

MOG has a 25% stake in an imminent, paid-for drill programme offshore Malta, and therefore the proposed tie-up gives investors in the Falklands oil driller an unexpected near-term catalyst.

Genel Energy (LON:GENL), under the terms of a farm-out deal in August 2012, will cover all the drilling costs of the first well and would pay the first US$30mln of MOG’s bill for a follow up well.

Earlier this week, MOG told investors that the Noble Paul Romano rig had come under contract and had begun sailing to the location of the Hagar Qim 1 well, which could spud in a matter of days.

Rockhopper will pay MOG shareholders 6.5p per share, valuing the company at £29.3mln, with 4.875p per share being paid in cash and the remainder in shares. They will receive 0.0172 Rockhopper shares for each MOG they own.

The takeover values MOG at a 15% premium to yesterday’s closing price of 5.625p.

In the event that the Hagar Qim 1 well is a success there will be a further sweetener for MOG’s current shareholders, as RKH will make a further one-off cash payment (between £11.9mln and £16mln) if it establishes contingent resources in excess of 80mln barrels of liquid hydrocarbons.

“While the acquisition cost and capital exposure are modest in relation to our balance sheet, the upside potential is significant and we believe that the new acreage will create an attractive entry platform to one of the most exciting regions in the industry at this time," said Pierre Jungels, Rockhopper chairman.

On AIM, Rockhopper shares were down slightly at 94p whilst MOG shares advanced 17.78% to trade at 6.62p in early deals.

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