Nostrum Oil & Gas (LON:NOG) is aiming to gazump AGR Energy’s bid for control of Tethys Petroleum (LON:TPL, TSE:TPL).
Pitching an offer at 21.85 Canadian cents (11p) per existing Tethys’ share the Nostrum approach would value the company at C$73.5mln (£37.2mln).
In a brief statement Tethys, as is customary with such announcements, told investors that there can be no certainty that any firm offer will be made by Nostrum, and nor can there be any certainty over the terms at which a firm offer might be made.
Nevertheless, the potential approach from Nostrum, a larger Kazakh based oil firm with cash in the bank, opens up an alternative option for Tethys shareholders.
Shares in Tethys soared over 25% in both London and Toronto on Monday.
Already on the table is an offer from AGR Energy, a vehicle of the Assaubayev family, which is prepared to invest US$47.7mln.
Nostrum’s approach represents a premium of around 15% to the price that AGR agreed to pay for new shares, and is about 40% above Friday’s closing price in Toronto.
AGR earlier this month agreed to invest just over C$60mln (US$47mln, or £30mln) through a share placing, priced at 19 Canadian cents, to acquire up to 51% of Tethys.
That transaction would see the number of Tethys issued shares double, and theoretically values all of the enlarged company at C$124.4mln (£63mln).
Before today’s development Tethys shareholders appeared to have a relatively straightforward choice; allow the AGR placing or risk the group’s long term stability.
Tethys, in the RNS announcing the AGR deal earlier this month, warned investors that without an injection of capital at some point in the next twelve months there would be significant doubt about its ability to remain a going concern.
The company, at that time, also said there can be no assurance that there would be enough time to find and implement an alternative transaction.
“When we took this company on it was on the verge of insolvency,” chairman John Bell told Proactive Investors.
“We are still in a precarious position on financing, so we need to have a recapitalisation that allows us to take the business forward.”
Tethys’ key shareholders were said to be supportive of the AGR transaction; at least they were before Nostrum made its intentions known.
Bringing in AGR was considered something of a triumph. Indeed, the near 100% share price rally reaffirms a sense of relief among investors.
It is particularly notable that the transaction was something of a ‘plan b’ following the withdrawal of Chinese private equity group SinoHan, which in November 2013 pledged US$75mln but was unable to secure the necessary regulatory sign-offs.
Tethys appeared to have landed on it feet with AGR; which incidently is also understood to be in talks with Max Petroleum over a possible rescue financing.
“We’re very happy with the private placement with AGR,” Bell said in an interview with Proactive last week.
“The strategic process has gone very well for us. We are very happy with the deal we signed with AGR Energy.
“Having a strategic in-country partner that understands the nuances of the history, the practices of government and the politics is something that is would quite important. And AGR bring that in spades.
“We are also very like-minded about the forward strategy, which is all about hydrocarbons to Asia and in particular gas to China in the short term.”
Wherever it comes from the funding is likely to be about more than simply keeping the wolf from the door.
Proceeds from the AGR financing had already been earmarked for a ten well programme, which aims to lift production (from around 5,000 boepd currently) as well as funding the development of infrastructure and the exploration of new areas.
“We are very likeminded on strategy, on the planned use of proceeds and we’re very excited,” Bell added.
Nostrum, premium listed on London’s main market, is focused on Former Soviet Union (FSU) countries in central Asia. Its main asset it the Chinarevskoye field and the company produces 45,000 barrels of oil equivalent per day.
In results at the end of April the £1bn market cap company revealed it had a cash position in excess of US$300mln.