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UK: Prax E&P to acquire Hurricane Energy in GBP249 million deal

16 Mar 2023

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Prax E&P and Hurricane Energy have reached agreement on the terms of a recommended acquisition of the entire issued and to be issued ordinary share capital of Hurricane by Prax. The acquisition will deliver Hurricane Shareholders 12.50 pence per Hurricane Share and values the entire issued ordinary share capital of Hurricane at approx. £249.0 million.

Background to and Reasons for the Acquisition

  • Following receipt of an unsolicited offer in mid-2022 and after a period of engagement with the offeror, Hurricane received a follow-up offer from that offeror which the Hurricane Board concluded should not be recommended to Hurricane Shareholders. Thereafter, on 2 November 2022, Hurricane announced the initiation of a Formal Sale Process as referred to in Note 2 on Rule 2.6 of the Code, in order to establish whether there was a bidder prepared to offer a value that the Hurricane Board considered to be attractive, relative to the standalone prospects of Hurricane as a publicly traded company and accordingly one that should be recommended to all Hurricane Shareholders.
  • The Acquisition is the conclusion to a comprehensive FSP. The FSP was marketed to a wide audience of potential acquirors with an interest in acquiring assets on the UK Continental Shelf. Interest in the FSP was significantly diminished by the introduction of the Energy Profits Levy, and subsequent amendments, by the UK government. Twelve companies engaged in the FSP in a meaningful manner, with five providing actionable offers in compliance with the requirements of the FSP. After this thorough process, the Hurricane Board has resolved to recommend the Acquisition to Hurricane Shareholders.
  • Prax is a wholly-owned subsidiary of State Oil Limited, which is the ultimate operating holding company of the Prax Group, a leading, British headquartered, international integrated and diversified midstream and downstream energy group. Prax is committed to building a sizeable upstream business in the North Sea, complementing its midstream and downstream activities to create an integrated business, and it is focused on rapidly developing its oil and gas portfolio via acquisitions. The acquisition of Hurricane is the first strategic step, providing a platform from which its upstream division will grow.

Philip Wolfe, Chairman of Hurricane, commented:

'I am pleased by the outcome of what has been a thorough and exhaustive formal sale process. The Hurricane Board believes that the Acquisition will deliver more cash than Hurricane Shareholders are likely to have received from Hurricane's Lancaster oil field, on a much expedited timeframe, as well as mitigating the risks associated with production from a single well development. In addition, the Deferred Consideration Units offer the opportunity to share in future production out-performance or higher oil prices, as well as revenue from future acquisitions by Hurricane. Accordingly, the Board of Hurricane is pleased to recommend the Acquisition to Shareholders.'

Commenting on the Acquisition, Sanjeev Kumar Soosaipillai, Chairman and CEO of the Prax Group, said:

'The Prax Group is a leading British headquartered, international, integrated and diversified midstream and downstream energy group with revenues of c. US$10 billion, and 1,274 employees across seven countries. We have a strong balance sheet, which provides a solid platform to execute our strategic growth plans, the next leg of which is to build a scaled upstream business. We see great strategic value in being a fully integrated energy company and have invested in experienced upstream and M&A management teams to drive this. The acquisition of Hurricane will provide a strong foundation for further upstream investments. We look forward to the Hurricane team joining the Prax family.'

Commenting on the Acquisition, Alessandro Agostini, Head Of Exploration & Production of the Prax Group, said:

'We are committed to building a scaled upstream division and have the financial, strategic and management capacity to complete further upstream M&A at pace. Hurricane is the first step and the platform from which our upstream division will be built, as, together with our M&A colleagues we review the potential acquisition of further, complementary UK continental shelf upstream assets. We look forward to welcoming the Hurricane team as we build a scaled upstream division within the Prax group.'

Hurricane Energy

Hurricane is an oil & gas exploration and production company, focussed on fractured basement reservoirs offshore West of Shetlands on the UK Continental Shelf. Hurricane has a 100 per cent. operated interest in the Lancaster Field. As at 31 December 2022 the Lancaster Field's proved and probable reserves were certified by ERCE Equipoise Limited ('ERCE') to be 6.6 mmbbls. Hurricane produced 3.1 mmbbls from the Lancaster field in 2022 and is currently producing 7,710 bbls/d from a single well, with a water cut of 52 per cent., into the leased Aoka Mizu FPSO. Production of 2P Reserves is projected by Hurricane to continue until August 2025 at an assumed US$80/bbl oil price, at which point the Lancaster field will be abandoned. As at 28 February 2023, Hurricane had Net Free Cash of US$140.1 million, as well as US$60.7 million of cash and liquid investments within restricted funds, relating to decommissioning security arrangements and amounts set aside to cover potential early termination fees on the FPSO lease. Hurricane has 28 employees and offices in Surrey and Aberdeen.

Original article link

Source: Hurricane Energy

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