pounds 55m Ramco bid for JKX frees Horton from second fiasco

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The Independent Online
Sir Robert Horton, the Railtrack chairman and former chief executive of BP, was yesterday bailed out of a second fiasco in the oil sector when JKX Oil & Gas, a more recent oil venture of his, succumbed to a pounds 55m bid from rivals Ramco Energy.

The all-paper offer of one of Ramco's shares, listed on the Alternative Investment Market, for every 25 in JKX values the latter at 47.5p a share. Shares in JKX jumped 3.5p to match the bid terms yesterday, while Ramco moved ahead 30p to pounds 11.875.

The agreed bid marks the end of an unhappy stock market career for the group chaired by Sir Robert, ousted from BP in 1992. It was launched at 190p a share two years ago and the price initially soared to 226p on euphoria that JKX would cash in on existing oil and gas reserves in the Ukraine and Georgia.

In the event, the group was dogged by disaster, including the revelation that Peter Young, the disgraced former fund manager at Morgan Grenfell, had acquired a 19 per cent stake for his funds.

More fundamentally, it took much longer than expected to build a profitable business in the politically-troubled south-western corner of the old USSR. Production, currently close to 11,200 barrels of oil equivalent a day, has not lived up to initial expectations and the failure of a large customer to pay for gas meant most production had to stored last year.

Yesterday it emerged that the group's joint venture with the Ukrainian government, the Poltava Petroleum Company, had suspended oil and gas supplies to another customer which had been overdue with payments in March and has still not paid up.

The Ramco deal, accepted by holders of 26 per cent of the shares, comes after a rescue rights issue raised pounds 14.2m in March at 34p a share mounted by new management. In February, the then chief executive, David Robson, was replaced by Bob McCrackin, formerly with Mobil. The group also revealed that pre-tax losses had risen from pounds 2m to pounds 2.4m last year, despite a jump in turnover from pounds 2.1m to pounds 15m.

In June, JKX announced that it had signed a new deal to deliver gas to six regional gas distributors in the Ukraine, which has resulted in payments totalling some $746,000. However, the directors said yesterday that "further political and economic change in Ukraine could continue to make operations in Ukraine difficult for JKX and place considerable demands on its resources in the long term". As a result, they had entered the discussions with Ramco.

The takeover is unlikely to lead to a bonanza for the JKX board, which collectively owns just 92,700 shares.