Parkmead in £14.5 million swoop for rival

Tom Cross said Lochard deal was the biggest to date for Parkmead

The two companies have agreed the terms of a takeover that values Lochard at about £14.5 million. The all-share deal will vastly increase Parkmead’s revenue stream thanks to Lochard’s 10 per cent stake in the productive Athena field.

Cross said: “This is the most exciting and important deal for Parkmead to date.

“The acquisition of Lochard will increase Parkmead’s production by over 400 per cent, and therefore provides it with a significantly enhanced cash flow profile.

“The combination of Parkmead and Lochard will create a stronger and more diverse portfolio of assets, balanced across the UKCS and the Netherlands.”

Cross, who took over Parkmead after leading Dana Petroleum into a £1.87 billion buyout by Korea National Oil Corporation in 2010, said the addition of Lochard’s production would enable the firm to deliver its ambitious growth plans.

In December Cross upped his stake in Parkmead to 27.19 per cent in a share placing and debt-for-equity swap that raised £20m for the group to continue building its portfolio.

The move followed the acquisition of Aberdeen-based Deo Petroleum in August. The company also splashed out on stakes in North Sea gas fields and onshore oil and gas fields in the Netherlands as it builds itself up into an exploration and production firm.

The latest deal will see  Lochard investors offered 0.385 Parkmead shares for each of their shares. The deal is equivalent to about 4.9p a share, below their 5.5p valuation at the close on Wednesday.

Lochard – which is headquartered in Australia but whose main asset is its stake in the  Athena field in UK waters – put itself up for sale in September, with directors saying it was the best way to realise vaule in business.

At the time, shares were trading around the 7p mark and there were hopes a buyer would pay a premium, but their value slid as suitors failed to emerge.

The purchase compares to £34.5m paid by Trap Oil for a 15 per cent stake in Athena last year. The field is producing about 10,800 barrels of oil equivalent a day and is estimated to contain between 10 and 15 million barrels of recoverable reserves.

The deal requires the approval of 75 per cent of Lochard shareholders. Parkmead says it already has the support of 40.1 per cent, including the 31.4 per cent controlled by Henderson Global Investors.

Clive Carver, chairman of Lochard, said the board believed that company would be best served by becoming part of a larger entity.

He said: “The Lochard directors believe Parkmead is of a size and quality that will enable it to continue to source and fund exciting exploration prospects and development opportunities at a time when obtaining funding for smaller exploration companies remains difficult. The cash flow from Athena will assist the combined entity in pursuing further growth.”