The boards of directors of Maurel & Prom and MPI have unanimously approved the principle of a merger between the two companies under a merger by absorption of MPI by Maurel & Prom.
Unlike the conditions which prevailed in 2011, Maurel & Prom and MPI currently have to face a difficult macroeconomic environment following the sudden drop in the price of oil, the lack of visibility related to their size, which limits their access to the best conditions that the financial markets have to offer and restricts their capacity for external growth in a capital-intensive industry.
The board of directors believe that the merger is a logical step in consolidation of the sector and would enable the new company to benefit from a reinforced financial capacity resulting from: a combination of significant cash flows from production in Gabon and Tanzania and dividends from Seplat in Nigeria; better access to financial markets; and substantial cost synergies and tax savings which, for example, would have represented US$16.2 million (EUR 14.5 million) for the 2014 financial year on a pro forma basis, of which $13.4 million (EUR 12 million) in tax savings and an estimated $2.8 million (EUR 2.5 million) in operating expenses corresponding to listing, structural and management costs of MPI.
The merger would also enable the new entity to benefit from an attractive combination of already developed onshore assets, offering a favorable oil (variable price)/gas (fixed price) product mix and greater geographic diversification combining onshore operated assets generating substantial oil production with long-term visibility (Gabon), operated assets that began producing gas on 20 August 2015 offering exposure to East African countries (Tanzania), a significant stake (22%) in Seplat, one of the indigenous operators in Nigeria with strong potential for growth, significant upside development and appraisal potential in Canada, and exploration regions in Colombia, Myanmar and Namibia.
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