Deals of the Week: Dominion Petroleum Becomes Latest AIM Explorer To Be Acquired

by: Evaluate Energy

Dominion Petroleum became the latest small cap exploration company to be picked off this week by a larger peer. The share performance of pure exploration companies on AIM has been hit particularly hard by the drop in sentiment since April 2011 and even with a premium over the day prior price of 64%, investors who only entered into Dominion Petroleum during the first four months of the year will be nursing losses from this deal. The consideration by the acquirer, Ophir Energy amounts to $173 million including cash held by Dominion Petroleum for 4 million acres of exploration land primarily in East Africa.

Assessing the true value of Dominion Petroleum is a largely subjective exercise due to the low level of capital on the balance sheet and the lack of a discovery within the company’s asset portfolio. The prospects for a booming gas industry in the East of Africa look promising however following three gas discoveries in Tanzania from Ophir Energy alone and a potential 10TCF of gas discoveries offshore Mozambique by Anadarko. The main assets of Dominion are composed of exploration blocks offshore Tanzania, one of which only a fortnight ago attracted a $22 million farm in from Mubadela Corp for a 20% interest.

Sinopec (NYSE:SHI) added to China’s Canadian asset grab this week through a $2.9 billion (including debt) takeover of Daylight Energy, Inc. (OTC:DAYYF) Sinopec achieved a recommendation from the board of Daylight by offering C$10.08 per share, representing a huge premium over the $4.59 that Daylight Energy were trading at one day prior to the offer. In Daylight Energy they will receive a company 67% weighted towards gas and with the majority of reserves already developed. Daylight also offers additional upside in their land holdings in the Montney shale play and the company’s recently disclosed 130,000 acre land position in the rapidly emerging Duvernay shale play. The acquisition metrics after the exploration upside and tax pools have been considered equates to under $18 per proven boe of reserves.

The move follows a similar pattern to other Asian NOC’s keen to utilize the developing LNG export capabilities on the west coast of Canada. The timing of the deal coincided with the Kitimat LNG terminal partners, Apache, EOG and Encana receiving an export license this week, paving the way for 1.2 bcf/d of gas to be shipped from Canada to the vastly more lucrative Asian markets by 2016. Kitimat may soon be followed by another major export terminal in British Columbia if the proposed LNG facility by Progress Energy and Petronas passes its feasibility study. Prior to Sinopec’s offer, PetroChina were also close to completing a major gas acquisition via a $5.4 billion joint venture with Encana (NYSE:ECA) in the Montney shale play before negotiations subsequently broke down in June.

Delek US Holdings (NYSE:DK) increased their interest in the El Dorado refinery in Arkansas to 100% by paying $13 million for the final 11.7% interest in Lion Oil Company. The consideration per barrel of capacity for the 80kb/d refinery was less than half of what Delek paid in March of this year and was telling for a US refining sector which looks set to enter into another period of stifled earnings on the back of decreasing domestic demand.

Canadian based Pacific Rubiales (PEGFF.PK) teamed up once more with Maurel et Prom (OTC:MRELF) week when they farmed into a 50% interest in Block 116 in Peru. The two companies were already joint partners in the Sabanero discovery and the Muisca exploration blocks in Colombia via a similar farm in from Pacific Rubiales in March 2011.

Outside of the upstream sector A.P. Moller – Maersk (OTCPK:AMKAF) divested its subsidiary, Maersk LNG for $1.4 billion to Marubeni and Teekay Corp. Maersk LNG are the owners of 6 LNG vessels but the subsidiary has been deemed to be non-core to group’s future strategy. In the oil services sector there was yet another major consolidation when Superior Energy Services (NYSE:SPN) acquired Complete Production Services (NYSE:CPX) for $3.1 billion including debt. The price appears to be a fair vale given that the interim results suggests an EBITDA multiple of 5.6 and cash flow multiple of 8.1.


Target Company

Target Business Segment

Brief Description

Total Acquisition Cost ($000)

Superior Energy Services

Complete Production Services, Inc.

Oil Services

Oil Service companies, Superior Energy Services and Complete Production Services, Inc. merge



Daylight Energy, Inc


Sinopec acquires gas-weighted Canadian producer, Daylight Energy Ltd


Teekay Corporation

Maersk LNG A/S


Teekay LNG Operating LLC in partnership with Marubeni acquires Maersk LNG A/S


Marubeni Corporation

Maersk LNG A/S


Marubeni in partnership with Teekay LNG Operating LLC acquires Maersk LNG A/S


Holly Energy Partners, LP

HollyFrontier Corp


Holly Energy Partners, L.P acquires certain pipeline, tankage, loading rack and crude receiving assets located at HollyFrontier's El Dorado, Kansas and Cheyenne, Wyoming


Ophir Energy plc

Dominion Petroleum


Ophir Energy Plc acquires Dominion Petroleum


Pacific Rubiales Energy Corp

Maurel & Prom


Pacific Rubiales Energy Corp farms in for 50% of Maurel et Prom's interest in the Lote 116 block located in northeastern Peru


SkyWest Energy Corp.

Marquee Petroleum Ltd.


SkyWest Energy Corp. acquires Marquee Petroleum Ltd. and renames to Marquee Energy Ltd.


Delek US Holdings

Lion Oil Company


Delek US Holdings acquires an additional 11.7% stake in Lion Oil Company to bring its ownership to 100%



Ironhorse Oil & Gas Inc.


Ironhorse Oil & Gas disposes of its natural gas properties located at Shackleton, Saskatchewan


Portal Resources Ltd



Portal Resources acquires producing heavy oil property in West Central Saskatchewan


Dragon Oil

Cooper Energy Ltd


Dragon Oil farms into a 55% participating interest in the Bargou Exploration Permit, offshore Tunisia from Cooper Energy Limited


Click to enlarge

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.