Sale of Lansdowne Oil & Gas on the cards

The anticipated wave of consolidation set for the international oil and gas sector could be about to hit the Celtic Sea, with Lansdowne Oil & Gas — the minority shareholder in the Barryroe field — likely to be sold.

The Dublin-headquartered firm, a 20% junior partner to Providence Resources at Barryroe, yesterday announced the launch of a strategic review of its business. While it said that the review — being undertaken to look at ways of maximising shareholder value in current difficult market conditions — would include all options, including that of continuing with current structure and strategy; management stated that a farm-down or total sale of some assets; a merger with another company or a complete sale of the business will also be considered. The latter option is the most likely outcome according to some industry commentators.

“Likely suitors will include all currently involved in the Celtic Sea looking to increase scale. It also could include any one of the various parties — especially the smaller groups — that have looked at Barryroe and would have some interest in becoming involved without having to take on the large stake held by its partner in the project,” said Job Langbroek, at Davy Stockbrokers.

“It is early days yet, but the review is logical and makes sense in the context of current markets. We suspect the stock is likely to tick higher, especially if the review leads to a possible stronger outcome,” he added.

“Lansdowne raised a small amount of equity capital in early March, as well as a loan note to one of its major shareholders to the value of £1.9m. However, the relatively small amount of cash raised and the early repayment of the loan note in March 2016, limits the scope for business-as-normal operations — especially in a high-cost offshore context. Consequently, the review should not come as a surprise,” according to Mr Langbroek, who said the news “clearly reflects the scale of the downturn in oil and related equity markets and points to the stress felt by smaller players in the market, as they try to advance projects using equity as the primary source of finance.”

One player potentially interested in Lansdowne’s news is fellow Irish explorer Fastnet Oil & Gas, which last month significantly extended its existing Celtic Sea asset portfolio and expressed openness to partaking in merger and acquisition activity in the coming years.

“As previously stated, we have a clear strategy to deliver significant shareholder value and, in this context, we have been evaluating and continue to evaluate M&A opportunities that best fit with the company’s strategy,” Fastnet’s CEO Carol Law said yesterday.

Ms Law declined to make any direct comment regarding Lansdowne, but noted her company currently has around $17m (€16m) in uncommitted, free cash and notes that “the current market environment is awash with M&A opportunities for companies such as Fastnet that have large amounts of uncommitted cash.”

As well as the 20% stake at Barryroe, Lansdowne’s asset portfolio includes a 20% holding in the Midleton gas prospect, which includes a fully carried well by local operator Petronas.

Lansdowne, whose shares were up by over 22% in London yesterday, is now technically in an “offer period”, despite all options remaining open to it, as defined by takeover rules.