Fusion Oil rejects Sterling Energy bid

Click to follow
The Independent Online

Fusion Oil & Gas, the African oil explorer, yesterday rejected an all-share bid approach from fellow AIM-listed oil group Sterling Energy on the grounds that the offer significantly undervalued the company.

News of the bid sent shares in Fusion 6p higher to 37.25p, valuing the group at £36m, although it was unclear at exactly what level Sterling's bid had been pitched. Fusion Oil's managing director, Alan Stein, was keen to stress that the approach from Sterling had been unsolicited and that a link-up of the two companies offered nothing in the way of cost savings. Sterling Energy is also listed in London but the bulk of its assets are located in the US.

Fusion Oil is focused on developing offshore West Africa. The company has exploration wells in Gabon, Senegal, Guinea Bissau and in Mauritania, a part of the world which has become of increasingly important to oil needy western states, given the ongoing turmoil in the Middle East. Despite a history of political turbulence and social strife in the region, drilling for oil offshore is viewed as a safe and secure haven for oil and gas companies. Even during the 25 years of civil war in Angola, offshore oil exploration continued largely unaffected.

In a note to investors yesterday, Investec Securities argued that a bid for Fusion is without doubt a possibility and suggested that in order for it to be successful it would have to be at a share price "significantly" above the current level. Fusion also reported full year results yesterday, which saw the group post its first ever profit. The oil explorer, which floated three years ago, recorded a pre-tax profit of £3.2m for the year to 30 June, largely thanks to the disposal assets in Mauritania to rival Premier Oil.

Fusion's biggest share holder is Westmount Energy, an AIM-listed company, which focuses on investing in oil and gas explorers. News of the bid for Fusion Oil caused its shares to jump 10p to 52p. Westmount secured its 20 per cent holding in Fusion after providing the group with early stage capital with which to fund its development.

Comments