Company on verge of becoming major player in oil and gas

TULLOW Oil has launched an €862 million bid for Australian exploration firm Hardman Resources.

The move would make Tullow the largest independent oil and gas company in the world with an output of close to 80,000 barrels of oil per day and add around a third to the Irish’s firms reserves.

Tullow has offered AUS$2.02 in cash for each Hardman Resources, valuing it at AUS$1.47 billion, or €862m. The price being paid by Tullow for the company is 54% higher than Hardman’s closing share price last Friday.

The takeover requires the approval of Hardman’s shareholders.

Aidan Heavey, chief executive of Tullow, said the takeover gives the company access to exploration areas in more African countries than it is presently in and full control of oil producing fields in Uganda. Tullow and Hardman are joint owners of two fields in Uganda, one of which the Australian company estimates could have up to 300 million barrels of oil.

“On the back of where Hardman is today, this looks like a relatively good deal,” said Andrew Blakely, an oil and gas analyst at Macquarie Equities. “The question is, is it sending a signal that there’s unquantified value in Uganda that Tullow is aware of that we in the market haven’t been factoring in? Maybe.”

Mr Heavey said that when Hardman’s assets are combined with Tullow it will be the largest holder of exploration licences in Africa.

Tullow said that the takeover will immediately add 6,000 barrels of oil to its existing daily production of 70,000 barrels.

For the six months ended June 30, 2006, Hardman Resources reported profits before tax of AUS$31.1m and net assets of AUS$542m.

“The acquisition of Hardman Resources is an excellent strategic fit with Tullow’s production, development and exploration activities,” Tullow said in a statement.

According to Hardman, its investors have reacted “very positively’ so far to the offer. The Australian company has agreed to pay Tullow nearly AUS$15m if a rival offer emerges.

“While additional production from the deal will be relatively small … it does provide an extensive exploration portfolio and additional reserves of 30%.

“In addition, the deal sends a strong signal with respect to the internal view of Tullow and its partners with regard to the acreage around Lake Albert in Uganda,” Goodbody Stockbrokers said.

Tullow shares fell by 3 cents to €5.32 on the Dublin stock market, valuing the company at €3.4bn

* Additional reporting by Bloomberg