Arthur Andersen, the consultancy and accounting firm that is also Aran's auditor, halved the projected value of Aran's 17.7 per cent stake in the Schiehallion oil field west of the Shetland Islands from pounds 435m to pounds 229m.
That implies the field is worth much less to Aran than recent City calculations have suggested. Some analysts reckon Aran's producing assets, such as the Alba and Gryphon fields in the North Sea, are alone worth between 30p and 40p a share. Arco is offering Aran shareholders just over 61p per share, against Friday's closing price of 68p.
Although Schiehallion is expected to come on stream in 1997, two years earlier than previously thought, Arthur Andersen warns that peak flow rates from the deep-water field will be less than expected, pushing operating costs higher as the field's estimated life is extended by six years to 2011.
News of Andersen's downbeat report drew an angry response from Aran. "They are obviously not in the picture if they have downgraded," said a company spokesman.
Hopes that Schiehallion would turn out to be a crock of gold were raised a fortnight ago when British Petroleum, which discovered the field, issued a positive drilling report that showed oil deposits spread across all five blocks west of Shetland, including the sector where Aran is represented.
The test's progress was well known within the industry and caused few surprises when published, though some estimates of the field's potential reserves were revised towards the top end of the 250 million-500 million barrel range.
Nevertheless, estimates of the size of Aran's interest in Schiehallion remain pure guess-work. "Nobody knows how big is the field and how much sits in Aran's blocks," noted one London-based oil analyst. Further information on the potential size and value of the Schiehallion field may emerge in the next few weeks when Aran publishes its defence document.
As it is unlikely that a white knight will emerge, analysts believe Aran's days as an independent oil explorer and producer are numbered, particul arly if Arco raises its offer.Reuse content