£30m oil deal for husband and wife

A HUSBAND-and-wife team who left successful careers in the oil industry to set up their own business less than a decade ago yesterday sold it in a £30 million deal.

Miles Newman and Isabel Davies, who specialise in helping identify potential prospects in the North Sea, built up a portfolio of interests in exploration licences through their Aberdeenshire-based company, Reach Oil & Gas, which Aim-quoted Trap Oil is buying for 20m in cash and 10m in shares.

Banchory-based Reach, which employs just two staff in addition to the owners, successfully bid for its first exploration licence in 2003 and went on to build up interests in 14 covering 24 blocks on the UK continental shelf.

Newman, who was exploration director of Reach and will join the board of Trap Oil as a non-executive director, told The Scotsman it was a good deal for both parties.

"We have had various offers over the years but we felt Trap was best-placed to take the portfolio forward."

The shares element of the deal will ensure the couple still retain a significant interest in the licences.

"We wanted to stay involved in the blocks we have interests in as we believe they have a lot of potential," added Newman.

The couple had set up their own business - named after their daughters' favourite S Club 7 song at the time - in 2002 after geologist Newman left Kerr McGhee and geophysicist Davies left Amerada Hess.

Although the first licence Reach acquired did not yield oil, in the next licensing round it secured three licences and struck a deal with Petro-Canada after finding oil in one of the blocks. The couple went on to invest the proceeds in buying more licences.

Newman said he and his wife, who are both in their forties, had benefited from being able to progress a number of opportunities since changes were brought in ten years ago by the UK government to help smaller companies identify potential prospects in the North Sea.

"They have created a good environment to encourage smaller companies to look at developing ideas to keep the exploration pipeline strong," said Newman.

"We have been quite active, although as a non-operator which has farmed out its interests in licences we haven't really been in the spotlight."

Trap, which joined Aim in May, said the acquisition more than doubled the size of its exploration portfolio.Chief executive Mark Groves Gidney said the fact that some 17m of drilling costs were already being carried by Reach's partners in respect of wells expected to be drilled over the next two years made it a "very good deal" for Trap Oil shareholders.

"It greatly strengthens our existing portfolio, delivers the drilling opportunities envisaged at the time of our IPO and positions Trap Oil as one of the more active exploration and appraisal companies in the UK North Sea".

Gidney said the fact that Newman had agreed to accept a significant part of the purchase price in the form of new Trap shares underlined his "long-term commitment to the company's future success".

Alec Carstairs, Ernst & Young M&A partner, who advised Reach on the deal, said it demonstrated "continued investor enthusiasm for attractive portfolios of North Sea assets".

"It shows that notwithstanding challenges for the industry, transactions can be achieved that yield a successful outcome for both buyers and sellers."

A related business owned by Newman and Davies, Reach Coal Seam Gas, is not involved in the deal with Trap. That business is involved in developing coal bed methane and shale gas assets.

In 2006, the couple met then chancellor Alistair Darling on a visit to Aberdeen when he praised the couple's entrepreneurial spirit.

"It is highly unusual for a husband-and-wife team to find oil anywhere, let alone the North Sea. They had the initiative to do it and applied for consents and they struck oil," Darling said at the time. Shares in Trap Oil closed up 0.5p at 42p.