Executives from Elf have contacted Enterprise, Britain's largest oil independent, in compliance with an agreement that Enterprise be given prior notice of any intended sale.
The move follows Elf's decision to reclassify its shareholding in the British group as 'non-core' ahead of its privatisation by the French government later this year.
The change of status has sparked concern at Enterprise that Elf is preparing to dump the shares at a time when the oil sector is already under pressure from weak oil prices.
The possible sale, involving up to 48 million shares, would almost certainly cause a huge overhang of Enterprise paper. As a result, Enterprise's top management team, including Graham Hearne, chairman and chief executive, has been anxious to establish Elf's intentions.
Representatives from the two groups meet regularly to discussion operational issues on their joint venture, Elf Enterprise, which owns a stake in several key North Sea oilfields.
Insiders say the venture has provided them with an informal forum to discuss Elf's plans. Despite the talks, Enterprise is thought to have received no firm sign of Elf's intentions.
The obvious method of disposal would be a share placing. Under an agreement signed by the two, Elf is required to consult Enterprise over a placing. But the French group would also need Enterprise's express permission if it wanted to sell out to a single buyer.
Elf is under considerable pressure to improve its financial performance after reporting a sharp drop in net profits from Fr6.2bn (now pounds 722m) to Fr1.1bn ( pounds 128m) last year. Thanks to an ambitious expansion programme it is facing debts of about Fr40bn.
Under its chairman, Philippe Jaffre, the company has launched massive retrenchment that includes the disposal of peripheral assets to concentrate on its core business.
The strategy is aimed at boosting Elf's profits as it applies finishing touches to its privatisation programme. The French government's offer and placing was oversubscribed three times, although the state sell-off will not be completed until next month.
In addition to the 10 per cent holding, Elf also indirectly owns another 14 per cent of Enterprise through a joint venture.
The combined interest was originally acquired from Lasmo, the struggling oil independent, at 450p a share about five years ago.
The joint venture with Elf was formed to buy out the North Sea assets of Occidental, the US group, for pounds 800m.
Although the two companies had planned to develop the venture further, little progress has been made. Some industry experts believe the lack of progress could also be an important factor in Elf's decision to reclassify its holding.Reuse content