Hurricane Energy has launched a sale process after receiving an unsolicited offer from an unnamed bidder which its board considered too low.
The UK-based North Sea oil and gas producer released as statement explaining that it received an offer for the entire issued share capital of the company at an indicative price of 7.7 pence per share in cash.
This indicative offer was at a premium of only 13% compared to the mid-market closing price of 6.8 pence per share on 1 November, so directors concluded that it should not be recommended to shareholders.
Hurricane stated that it "is in a very strong financial and operational position", however Crystal Amber Fund - which holds 28.9% of its shares, making it the largest shareholder - has indicated to the board its desire to monetise the value of its shareholding.
Therefore, the company has decided to launch a formal sale process in order to establish whether there is a bidder prepared to offer a value that the board considers attractive.
The note added that Hurricane is currently debt free, with forecast year end net free cash of circa $118m - at $90 per barrel of oil - and a valuable asset base. It also has more than $370m of value available in tax losses, as at the end of June.
In the event that the process does not result in a transaction, the board stated that it intends to commence a significant capital return programme, with up to $70m - equivalent to 3.1 pence per share - to be returned to shareholders in the first quarter of next year, upon completion of a capital reduction.
Following that, and in the absence of more favourable alternatives, further distributions could then be made during 2023 and beyond.
The board has appointed Stifel Nicolaus Europe as its financial adviser with regards to the potential sale.
Hurricane chair Philip Wolfe commented: "The board intends to deliver near term shareholder returns through either the successful outcome of the formal sale process or with a substantial capital return programme.
"Hurricane is in a strong position with an experienced senior team, robust balance sheet, profitable ongoing production and significant tax losses - a platform capable of supporting distributions throughout Lancaster's expected economically productive life."
Last year, Hurricane effectively gave control to its creditors in a debt-to-equity swap, after its downgraded its flagship field and production outlook, with the share price collapsing to below one penny in May 2021.
This followed Crystal Amber moving to have several members ousted from the company’s board - including non-executive directors Steven McTiernan, Dr David Jenkins, John van der Welle, Sandy Shaw, Beverley Smith, John Wright and David Craik.
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