Medco may buy Australia's Novus
Rendi A. Witular, The Jakarta Post, Jakarta
Publicly listed oil and gas firm PT Medco Energy International announced on Monday it intended to acquire Australian oil and gas company Novus Petroleum Ltd. for A$326 million (US$240 million) in what analysts said could be the largest takeover of an Australian company by a local firm.
In a letter to the Australian Stock Exchange (ASX), Medco said it wanted to buy 90 percent of Novus shares on issue at A$1.74 each, or 35 percent higher than the closing price of the company's shares on Friday at the ASX.
Medco, which is listed on the Jakarta Stock Exchange (JSX), said the move was aimed at stemming its declining oil reserves.
Novus is Australia's fifth largest upstream oil and gas company by sales.
"The Novus assets are attractive to us, as they can expand our interest in Indonesia and give us the potential for geographic diversification of our asset base," said Medco president Hilmi Panigoro in the letter.
The acquisition plan will be fully financed from the company's US$250 million unsecured notes issued in May, and from operating cash of around $40 million.
Medco, which has proven and probable reserves of 754 million barrels of oil equivalent (MMBOE), said that if the acquisition was successful, it would undertake a thorough review of Novus operations; but in the near term, it would maintain Novus assets and existing employees, including senior management.
Novus has assets in Australia, Indonesia, Oman, Pakistan, the Philippines and the U.S., with proven and probable reserves of 107 MMBOE.
Last year, Novus' revenue totaled A$177 million, but an operating loss after income tax of A$34 million.
In response to Medco's plan, Novus said in a statement to the ASX that it had not yet received a copy of Medco's bid statement. Novus noted from Medco's announcement that the offer would be highly conditional and it was immediately clear that the offer did not take into account the underlying values of Novus.
Elsewhere, Norico Gaman, an energy and mining analyst with BNI Securities, said public investors should examine the acquisition plan carefully.
"The plan will be financed mostly by debt. This will burden Medco and risk its net profit if, in the end, it turns out that Novus has no reliable long-term reserves," he said.
The acquisition plan is slated to be approved at a shareholders meeting in January.
Medco shares on the JSX rose by Rp 75 to Rp 1,375 as news of the plan was released.
Medco is the country's largest listed oil and gas company on the local bourse, with a market capitalization of around US$510 million and operations in Southeast Asia, the Middle East and North America.
The company was founded over 20 years ago by businessman- turned-politician Arifin Panigoro.
In a recent public expose, Medco projected that its 2004 oil production would drop by 14 percent on depleted reserves, which would force the company to seek new reserves immediately to compensate for a possible decline in sales.
Medco has projected that its proven oil reserves will last only four years, while its proven and probable reserves will run out in 12 years.