Tullow set for FTSE 100 after buying troubled Hardman for £581m

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The Independent Online

Hardman Resources, the oil exploration group hit by disappointing results in Mauritania, has been bought by the larger rival Tullow Oil for £581m.

Hardman, which is dual-listed in Australia and on London's AIM market, raised money from London investors earlier this year, only to later warn that production from Chinguetti, the first of its fields in Mauritania, West Africa, was well short of expectations.

By last Friday, the shares were trading at 53p, roughly half this year's high and well below the 98p at which the group raised £65m on AIM in April. Yesterday's agreed deal came at 81p a share in cash, though a partial shares alternative was offered.

Analysts agreed that the two companies were an excellent strategic fit, particularly as they already share a promising asset in Uganda. The transaction could catapult Tullow, already the second biggest independent oil explorer, into the FTSE 100 index.

Nathan Piper, an analyst at Bridgewell Securities, said: "Tullow was a willing buyer and Hardman was a distressed seller."

Mr Piper said the other independent operators most likely to be bought were those with a really significant asset, rather than a spread of interests. He pointed to the biggest independent, Cairn Energy, which had a huge find in India, and Soco, which has sizeable interests in Vietnam.

For Tullow, the deal raises contingent reserves by 30 per cent or 105 million barrels of oil. That equates to a purchase price of under $10 a barrel. It also adds 6,000 barrels a day to Tullow's 70,000 barrels of existing daily production.

Analysts said that, despite the weakness in the Hardman shares, the deal was struck at a "full" price. However, as the two companies work closely together, Tullow would know more about the potential of the Hardman assets than the official figures reveal.

Tom Hickey, the finance director at Tullow, said: "We are paying a fair price for this business. Circumstances create opportunities and Chinguetti had an impact on the Hardman [share] price."

He said the acquisition adds 50,000 sq km of under-explored acreage in Mauritania and full ownership of a basin in Uganda, which could yet prove to be a "billion-barrel" find.

It is easily the biggest purchase for the Africa specialist Tullow, which acquired Energy Africa for $500m (£263m) two years ago. Mr Hickey said analysts had also initially suggested Energy Africa was an expensive deal but, after further development of its assets, it has come out at less than $4 a barrel.

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