Aran's elephant defence

"ELEPHANT FIELDS" - huge undrilled exploration prospects in the north-west Atlantic - are expected to emerge as the centrepiece of the Irish minnow Aran Energy's final attempt to fend off a hostile pounds 161m cash bid from the US oil giant Arco.

The so-called Atlantic margin, where these fields are located, is effectively the last oil frontier around the British Isles.

It is a broad geological feature stretching in an arc from the west of Shetland to the north-west of Ireland. Aran believes it is uniquely placed to exploit any oil finds in the area. "Elephant fields are mostly in UK waters," says Michael Whelan, Aran's executive chairman. "We are the largest non-major oil company in terms of acreage in the Atlantic margin except for Enterprise."

Relative to its market capitalisation, he claims the Atlantic margin "offers an unparalleled opportunity to share in the results of exploration and development success in this area of intense oil industry interest".

According to independent oil consultants SSI, three-quarters of Aran's "risked exploration barrels" - volumes of oil most likely to be recovered - lie in prospects in the Atlantic margin area. Each prospect is estimated to contain more than 140 million barrels of recoverable oil.

That compares with the 22.2 million barrels of reserves Aran claims from the BP-operated Schiehallion field on the northern edge of the Atlantic margin.

Aran's 17.7 per cent stake in Schiehallion was considered to be the jewel in its crown - the field is due to come on stream in late 1997 - but attention now seems to be shifting to the company's exploration potential.

Aran's final defence document, due on Tuesday week, is expected to play down the significance of its Connemara field, where oil is expected to flow in three years' time. "Connemara is an important but small field, not part of the same Atlantic margin trend," argues Mr Whelan. "I see Connemara as an interesting and useful asset but not of great excitement."

Analysts yesterday were sceptical that Aran's change of tack would force Arco to raise its 61p per share offer significantly. They pointed out that the Atlantic margin did not even feature in the map accompanying Aran's initial rejection of the Arco offer, while the existence of oil in the area had yet to be proved.

"They will highlight anything that will get the value up," says one oil analyst in the City. "It is real pie in the sky. They are slightly clutching at straws."