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The Times: Eni’s £1.5bn takeover offer sends Burren Energy shares soaring

October 10, 2007
Steve Hawkes

Shares in Burren Energy soared by nearly 30 per cent yesterday after Eni, the Italian oil and gas giant, revealed that it had made a near £1.5 billion takeover approach for the London-listed explorer.

The statement, which caught most industry-watchers by surprise, triggered fresh speculation of a wave of consolidation across the City’s independent oil sector.

Eni said that its offer of £10.50 per share had been rejected by Burren but added that it remained in talks with both the group’s board and shareholders.

The announcement, prompted by the Takeover Panel, forced Burren to reveal that it had received a number of conditional bids priced at up to £11 a share. Burren said that it had rejected each one as they had failed “by a significant margin, to recognise the value which the board strongly believes is inherent in the company”.

Shares in the company still surged 250p to a record high of £11.72, a rise of 27 per cent, on hopes of a bid battle. The company floated in December 2003 at 130p. Under Atul Gupta, the chief executive, Burren has been working on a number of acquisitions to beef up production, and last month boosted its war chest by raising $500 million (£246 million) of debt.

It is understood to have been in talks with TNK-BP, BP’s Russian joint venture, about buying some of its smaller fields in the country as part of an asset swap.

TNK-BP is believed to be keen to break into Turkmenistan, where Burren runs the Nebit-Dag oil and gas concession. Analysts said yesterday that this asset was one of the reasons Eni was interested in the company.

Turkmenistan holds an estimated 100 trillion cubic feet of gas and President Berdymukhammedov has said that the Central Asian state was “open to the world”. Eni also works in partnership with Burren on its main asset, the M’Boundi oilfield in Congo-Brazzaville, after buying into the project this year.

Mr Gupta yesterday would only reiterate that Burren had a “very clear independent strategy for our future, which we are actively pursuing”.

Eni, with BP and Shell, is under huge pressure to take advantage of the dwindling number of opportunities open to the world’s leading oil and gas groups. The company said that its offer represented a 29 per cent premium to Burren’s share price over the past three months.

However, Colin Smith, an analyst at Dresdner Kleinworth, said that there was a case for Burren putting the asking price up to £14.00.

“We think there is a fairly high chance that mutually acceptable terms can be found with a likely upper limit of £14, although £13 is likely to be more acceptable to Eni,” he said. “For Eni the attractions are Burren’s production growth, an easy fit with Congo assets and an important entry into Turkmenistan.”

Shell was the last major to acquire a London-listed independent oil and gas business when it bought Enterprise Oil for £4.3 billion in 2002.

Shares in Premier Oil, Soco International, Venture Production and Cairn Energy, all rose yesterday as investors gambled that they may now attract bids.

Industry insiders say that both Premier and Soco are willing to listen to offers. Premier rejected a £1 billion bid from Dubai Energy in December.

Mr Smith said that Cairn and Sibir Energy may be the biggest beneficiaries of enhanced bid speculation.

America’s Energy Information Administration (EIA) said yesterday that growth in world oil demand in the fourth quarter of 2007 would be 87.41 million barrels per day.

That is a modest 230,000 barrels per day less than the agency’s forecast last month but still an increase of 1.78 million barrels a day, or 2.1 per cent, on the same period a year ago.

The agency’s monthly report also highlighted that higher crude oil prices were likely to push up the cost of fuel oil for household heating this winter by 10 per cent.

It also cut its oil demand projection for 2008 by 140,000 barrels a day from a month ago, to 1.4 per cent, but said that “tight market conditions will likely persist” through the year.

“The impact of higher [oil] prices and lower expectations for consumption growth in advanced economies is behind the downward revision for 2008,” EIA said. “The recent actions of some central banks have lessened, but not eliminated, the risk of lower world economic growth in 2008.”

http://business.timesonline.co.uk/tol/business/industry_sectors/natural_resources/article2625252.ece

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