Oil rivals in talks on pounds 2.3bn merger

ENTERPRISE OIL yesterday confirmed it was in merger talks with Lasmo, the arch-rival it failed to take over four years ago. If agreed, the merger would create an independent energy group with a combined market value of pounds 2.3bn.

Lasmo yesterday confirmed it was in discussions with Enterprise but said the outcome of the talks was still uncertain as a merger with Enterprise was only one of several options under consideration. The group is also in talks with other potential partners, including several oil giants.

"Lasmo is in discussions with a number of parties on a range of strategic initiatives, one of which is an evaluation of a possible merger with Enterprise Oil," the company said in a statement.

The talks began in December when Sir Graham Hearne, chairman of Enterprise Oil, began talks with his old rival Joe Darby, chief executive of Lasmo. Sir Graham's approach to Lasmo comes more than four years after Enterprise launched a disastrous pounds 1.7bn hostile takeover bid for Lasmo.

The talks between Enterprise and Lasmo are still at an early stage. Enterprise said it was engaged in "exploratory discussions which may or may not lead to a merger between the two companies".

Any merger would be on the basis of current market valuations. Enterprise is valued at pounds 1.4bn in terms of market capitalisation, while Lasmo is valued at pounds 910m.

The future positions of senior executives on both sides has not yet been discussed. Enterprise is said to be dismayed that news of the talks has already leaked.

Both Enterprise and Lasmo have also been in talks with other parties, including oil majors of a similar size to BP/Amoco, though these are not thought to include a full takeover.

A successful merger between Enterprise and Lasmo would conclude a saga which began with an acrimonious bid battle in 1994. Then, after an angry war of words, Enterprise's pounds 1.7bn bid for Lasmo failed to gain shareholder approval and left Enterprise, which had built up a 7 per cent stake in Lasmo, with a large paper loss.

Sir Graham Hearne, then chief executive and chairman, was forced to split his role and find a new chief executive. Many observers blamed Warburg's, Enterprise's advisers, for the debacle.

The reconciliation between Enterprise and Lasmo has been prompted by the slump in world oil prices in the second half of 1998. At $11.73 a barrel, nearly $7 cheaper than in 1997, the oil price is lower than it has been for 10 years.

The oil price slump has called into question the value of oil exploration projects planned by the two companies. Shares in Enterprise have more than halved this year from 604p to 283p. Shares in Lasmo have sunk by more than 70 per cent, from a May high of 297.5p to 94.25p on Friday.

Amid rumours of a cash crisis, Lasmo last week issued a statement insisting its share price was unjustified and denying rumours of a forthcoming rights issue. In its 1999 projections, the company is banking on an average price of $13 a barrel.

The company said its balance sheet was in good shape. It had a current cash balance of pounds 550m, pounds 150m in undrawn facilities, and gearing was 54 per cent.

In November, Lasmo said it was cutting 60 per cent of the staff at its London head office - 300 jobs. The company said it was concentrating on safer exploration projects and aiming to cut its costs by pounds 30m.

News of the talks underlines the mounting pressure for consolidation in the sector owing to the slumping oil price.

News
people

Top Gear presenter is no stranger to foot-in-mouth controversy

Arts and Entertainment
Imelda Staunton as Dolores Umbridge in the Harry Potter films
books

New essay by JK Rowling went live on Pottermore site this morning

News
Mike Tyson has led an appalling and sad life, but are we not a country that gives second chances?
people

Former boxer recalls incident when he was seven years old

Sport
A Rutherford Raiders shirt with the PornHub sponsorship
football

PROMOTED VIDEO
Arts and Entertainment
Charlie Sheen said he would
tv

Charlie Sheen could be set to revive his role as a hedonistic womaniser

Life and Style
Jamie Oliver’s version of Jollof rice led thousands of people to post angry comments on his website
food + drink
Arts and Entertainment
glastonbury
News
Apple CEO Timothy Cook
people
News
i100
Arts and Entertainment
Vividly drawn: Timothy Spall in Mike Leigh’s ‘Mr Turner’
film

Review: Mike Leigh's biopic is a rambling, rich character study

News
ebooksAn unforgettable anthology of contemporary reportage
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Trainee Recruitment Consultants

£20000 - £25000 per annum + OTE £35K: SThree: We consistently strive to be the...

Finance Assistant - Part time - 9 month FTC

£20000 - £23250 Per Annum pro rata: Clearwater People Solutions Ltd: Pro rata ...

Marketing Manager

£40 - 48k + Benefits: Guru Careers: We are seeking a Marketing Manager to join...

Market Risk Manager - Investment Banking - Mandarin Speaker

£45,000 - £65,000: Saxton Leigh: Our client is a well-known APAC Corporate and...

Day In a Page

The drugs revolution starts now as MPs agree its high time for change

The drugs revolution starts now as MPs agree its high time for change

Commons debate highlights growing cross-party consensus on softening UK drugs legislation, unchanged for 43 years
The camera is turned on tabloid editors in Richard Peppiatt's 'One Rogue Reporter'

Gotcha! The camera is turned on tabloid editors

Hugh Grant says Richard Peppiatt's 'One Rogue Reporter' documentary will highlight issues raised by Leveson
Fall of the Berlin Wall: It was thanks to Mikhail Gorbachev that this symbol of division fell

Fall of the Berlin Wall

It was thanks to Gorbachev that this symbol of division fell
Halloween 2014: What makes Ouija boards, demon dolls, and evil clowns so frightening?

What makes ouija boards and demon dolls scary?

Ouija boards, demon dolls, evil children and clowns are all classic tropes of horror, and this year’s Halloween releases feature them all. What makes them so frightening, decade after decade?
A safari in modern Britain: Rose Rouse reveals how her four-year tour of Harlesden taught her as much about the UK as it did about NW10

Rose Rouse's safari in modern Britain

Rouse decided to walk and talk with as many different people as possible in her neighbourhood of Harlesden and her experiences have been published in a new book
Welcome to my world of no smell and odd tastes: How a bike accident left one woman living with unwanted food mash-ups

'My world of no smell and odd tastes'

A head injury from a bicycle accident had the surprising effect of robbing Nell Frizzell of two of her senses

Matt Parker is proud of his square roots

The "stand-up mathematician" is using comedy nights to preach maths to big audiences
Paul Scholes column: Beating Manchester City is vital part of life at Manchester United. This is first major test for Luke Shaw, Angel Di Maria and Radamel Falcao – it’s not a game to lose

Paul Scholes column

Beating City is vital part of life at United. This is first major test for Shaw, Di Maria and Falcao – it’s not a game to lose
Frank Warren: Call me an old git, but I just can't see that there's a place for women’s boxing

Frank Warren column

Call me an old git, but I just can't see that there's a place for women’s boxing
Adrian Heath interview: Former Everton striker prepares his Orlando City side for the MLS - and having Kaka in the dressing room

Adrian Heath's American dream...

Former Everton striker prepares his Orlando City side for the MLS - and having Kaka in the dressing room
Simon Hart: Manchester City will rise again but they need to change their attitude

Manchester City will rise again but they need to change their attitude

Manuel Pellegrini’s side are too good to fail and derby allows them to start again, says Simon Hart
Isis in Syria: A general reveals the lack of communication with the US - and his country's awkward relationship with their allies-by-default

A Syrian general speaks

A senior officer of Bashar al-Assad’s regime talks to Robert Fisk about his army’s brutal struggle with Isis, in a dirty war whose challenges include widespread atrocities
‘A bit of a shock...’ Cambridge economist with Glasgow roots becomes Zambia’s acting President

‘A bit of a shock...’ Economist with Glasgow roots becomes Zambia’s acting President

Guy Scott's predecessor, Michael Sata, died in a London hospital this week after a lengthy illness
Fall of the Berlin Wall: History catches up with Erich Honecker - the East German leader who praised the Iron Curtain and claimed it prevented a Third World War

Fall of the Berlin Wall

History catches up with Erich Honecker - the East German leader who praised the Iron Curtain and claimed it prevented a Third World War
How to turn your mobile phone into easy money

Turn your mobile phone into easy money

There are 90 million unused mobiles in the UK, which would be worth £7bn if we cashed them in, says David Crookes