Compania Espanola de Petroleos SAU (CEPSA) has announced its intent to acquire Coastal Energy (CEN:TSX) for a total consideration of approximately $2.3 billion. CEPSA will pay $19 per share in cash for CEN which represents a premium of approximately 28%. CEPSA will assume nearly $51 million in debt from CEN as part of the deal. CEN’s board has unanimously supported the offer. 36.5 million shares from insiders and certain shareholders have already signed lockup agreements. Randy Bartley, CEO of Coastal, said: “This transaction delivers significant and immediate value to our shareholders.”
CEN owns and operates a series of productive Thai and Malaysian oil and gas assets. The company had average daily production of 21,832 boe/d in the third quarter of 2013 with most of that coming from offshore assets (1,444 boe/d onshore). The offer represents a price per flowing barrel paid of over $100,000. Although many of the international junior-to-mid tier E&P companies have been trading a severe discounts, CEN, with its portfolio of quality offshore oil and gas assets, have seen support in the markets. Remember, Petrominerales, with a similar topline production profile, is being acquired for by Pacific Rubiales for $47,000 per flowing barrel.
CEPSA is Spain’s fourth largest industrial group, employing over 11,000 people across a fully integrated oil and gas portfolio. They have oil and gas interests in Algeria, Brazil, Canada, Colombia, Panama, Peru and Portugal. CEPSA is wholly owned by International Petroleum Investment Company, which is wholly owned by the Abu Dhabi government.
CEPSA CEO, Pedro Miro, commented: “Today’s announcement reflects an important step in increasing CEPSA’s E&P capabilities. Coastal’s business comprises a high-quality portfolio of upstream assets located in Southeast Asia, operated by talented management and dedicated employees. We believe that Coastal provides a tremendous foundation for furthering our E&P strategy.”
A shareholder vote will be held in early January. CEPSA is entitled to a $76 million break-fee if the deal collapses. Shares are up $4.05 per share to $18.86 at the time of writing, suggesting the market doesn’t anticipate a higher bid coming in from someone else.