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(Alliance News) - Reabold Resources PLC said Friday it "strongly" believes in the merits of its all-share offer for Deltic Energy PLC.
On Thursday, Deltic - formerly known as Cluff Natural Resources - "unequivocally rejected" the offer, saying it "places no value at all on its significant non cash assets, not least its share of two potential high impact exploration wells".
Reabold has offered 1.5 Reabold shares be exchanged for each Deltic share. The exchange ratio would give an implied value for the entire existing issued share capital of Deltic of about GBP12.3 million - which is based on a closing price of 0.585 pence per Reabold share on Tuesday. Shares in Reabold Resources closed 3.3% higher in London on Friday at 0.59p each. Deltic Energy added 5.9% to 0.90p.
Deltic added that it does not believe there to be a "strong rationale, commercial logic or sufficient operational synergies that would justify a combination of the two businesses". Deltic noted it is fully funded to deliver on its existing strategy through to mid-2022.
Reabold responded Friday, by saying it is "optimistic" about the medium term prospects of Deltic's exploration wells in the North Sea, it does not believe there will be any significant activity or news flow until Shell UK Ltd starts drilling of Pensacola, which is expected to start in the second half of 2021.
"The possible offer provides Deltic shareholders with near term news flow from Reabold's exposure to two fully funded wells at West Newton, planned for the second half of 2020 which, being appraisal wells rather than exploration wells, Reabold believes exhibit a lower risk profile," Reabold added.
The company continued: "In-line with previous guidance, drilling at the West Newton B-1 well is expected to commence in the third quarter of 2020. The combined group would have a diverse and highly active portfolio of assets, including producing assets in California and near-term potential production from Reabold's assets in Romania."
Deltic, citing why it was against the deal, said it has "serious concerns" over Reabold's West Newton project.
Reabold retaliated by saying it is "disappointed" in Deltic's view, saying its understanding of the project is based on data from 2017.
"Reabold is surprised that the Deltic Board has noted 'serious concerns in relation to the technical viability, materiality and limited potential upside' in relation to West Newton, particularly given the fact that Deltic uses West Newton as an example of a potential analogue of Pensacola in its recent presentation materials and references the significant discovery at West Newton in its own regulatory announcements when referring to Pensacola," Reabold added.
Reabold believes the combined group would benefit from a "further strengthened" and "diversified" institutional shareholder base, which Reabold believes will "ultimately lead to increased liquidity for shareholders".
Reabold, however, has yet to make a firm offer for Deltic, but noted it would like to discuss the deal, and the West Newton project, in further detail with Deltic's board.
By Paul McGowan; paulmcgowan@alliancenews.com
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