Lasmo pays pounds 283m for Venezuelan oilfields

Lasmo, the UK's second largest independent oil exploration group, has embarked on its biggest ever expansion strategy and the most ambitious spending spree since its ill-judged pounds 1bn takeover of rival Ultramar six years ago.

The group is paying $453m (pounds 283m) in cash, by far its biggest production investment to date, to take over a large oil concession in north-east Venezuela, after beating off competition from operators in Argentina and China. The 20-year contract will also involve a further $750m of investment paid in the first five years of operations, which will raise Lasmo's forecast production by 25 per cent to 250,000 barrels a day by 2000.

The news gave a further boost to Lasmo's share price, which has already been lifted this year by news of a potentially lucrative gas find in Pakistan. The shares rose 11p to 259p, just short of their 12-month peak of 262.5p.

The plan is to substantially raise production capacity in the Dacion area in Venezuela, which includes three fields developed since the 1940s. The aggressive strategy, to rehabilitate existing fields, is a departure for Lasmo which has been better known for drilling in newly emerging areas like Algeria. The group said seismic tests had shown additional oil to that uncovered by the existing state operator, Corproven. No significant test had been carried out since the 1950s.

The $453m up-front investment would be paid on 1 August and would raise Lasmo's gearing levels from 27 per cent to around 50 per cent. Lasmo denied it was paying too much for the concession. The nearest bidder, from Argentina, had offered $50m less for the contract while the Chinese National Petroleum Corporation made a bid of $329m.

Joe Darby, chief executive said: "We certainly don't think we are over- paying. In face we could have paid more. It's enormous and 70 per cent of the block remains unexplored."

Mr Darby also dismissed suggestions that the investment was an attempt to head off a potential takeover approach from a rival oil group. "We are not focused on whether we're vulnerable as a takeover candidate. This is purely to add value for shareholders. Gone are the days when we were concerned at being taken over."

Mr Darby said further expansion plans were being considered in North Africa and Pakistan. Existing activities being developed focus on Algeria, the deep water fields to the west of the Shetlands, the Apennine mountains in Italy and a new partnership in Kuwait.