RE: wonder if11 Oct 2018 21:24
Just to clarify, it wouldn’t be down to Stephen Sanderson to decide whether or not an offer was accepted. This is a matter for shareholders, more than 50% of whom would have to accept terms set out in a formal document.
Given the preponderance of PI’s on the register, this would be an enormous hurdle. The logistics of securing >50% acceptances would be very difficult. Perhaps enough of a poison pill in itself to put off potential acquirors. Throw in some “over my dead body” and “not unless you double the price” activist groups in the shareholder base - you only have to read this board to KNOW these would soon materialise - and this just looks way too difficult to me. My current view therefore is that an early (ie pre-production) stage takeover is not likely. Sorry...
To change this, a change in the composition of the shareholder register will be required. A critical mass of institutional investors - whose typical holding size will be far higher than individual PI’s - would simplify the process of responding to offers as there would be simply fewer people to get on board in pursuit of the magic >50%. This may be achieved in part by institutional buying from PI’s over time, but I think it is likely that company management will look to accelerate this process through placing(s) to institutional investors when funding is next required. If all of the sites prove up as hoped during the next year or so, significant capex will be necessary. Let’s be clear that drilling multiple wells in multiple locations and equipping them all for production will be extremely costly. Funding them one-by-one from production will be cumbersome and time consuming. Before the inevitable Pavlovian LSE response, understand that placings are not necessarily dilutive (it’s the discount that matters) and can be implemented alongside debt financing if this desirable and/or possible.
At the end of this process UKOG would be a commercially viable oil company with a manageable shareholder base. A far far more attractive target for an acquisitive major than it is today.
TLDR: An early takeover is perhaps unlikely given the shape of the register. An institutional placing could address this alongside funding capex requirements.
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