Gulf Canada approaches Clyde

The oil exploration sector was set alight yesterday by a sighting shot for Clyde Petroleum from Gulf Canada Resources, a former subsidiary of the Reichmann property empire, writes Tom Stevenson. Clyde's shares closed 34p higher at 118.5p as dealers banked on Gulf's initial 105p-a- share approach being nothing more than an opening gambit in a hotly contested bid.

Gulf's Texan president and chief executive, James Bryan, known in the oil business as JP, called Clyde's chairman, Malcolm Gourlay, just before 7am yesterday to warn him of the imminent hostile approach.

By 11am, Clyde had issued a statement rejecting Gulf's offer as "unsolicited and wholly unacceptable".

Mr Gourlay described the timing of the approach as unfortunate, coming, he said, as the City was beginning to rerate Clyde's shares. As a second- liner with a bias towards oil production rather than exploration, Clyde has traded at a discount to its peer group.

He rejected Gulf's claim that the exercise and sale of options by Clyde directors this week at 81p undermined their argument that the bid undervalued the company. The numbers of shares involved, he said, were insignificant compared with the holdings directors had retained.

Mr Bryan described Clyde's record in exploration as "miserable", but said he had great respect for what Roy Franklin, Clyde's managing director, had done in creating a four-pronged business with operations in Australia and Indonesia as well as the Dutch and British sectors of the North Sea. The deal, Mr Bryan said, fitted in with Gulf's ambition of expanding its geographical spread beyond itsNorth American and Indonesian interests.

He said the pounds 432m offer was a full price, which represented a 35 per cent premium to Clyde's value on 27 November and a 24 per cent premium to the price at which the shares closed on Tuesday night. He compared the price with the 62p value Clyde's broker Hoare Govett had put on the company's net assets and the 84p "going concern" value, which includes probable and possible oil and gas reserves as well as the stricter proven variety.

The deal sparked a flurry of speculative interest in other smaller oil companies. Cairn Energy, Hardy Oil and Gas and Monument all saw their shares rise sharply yesterday, as did the larger players, Enterprise and Lasmo.

Clyde said it planned to set out the reasons for its rejection of Gulf's offer in a letter to shareholders. In the meantime, it said, shareholders should do nothing. Clyde said the terms "fail to take account of the record and prospects of Clyde and the quality of its business and portfolio".

Gulf's shares were off C$0.25 to C$9.30 in early trading in Toronto.