COMPANY NEWS: OMV increases pressure to acquire Hungary’s MOL

Dec. 10, 2007
Austria’s OMV AG has launched legal proceedings in the Hungarian courts to remove the barriers to acquiring MOL Rt., upping pressure on the company’s management to accept its $20.6 billion bid.

Austria’s OMV AG has launched legal proceedings in the Hungarian courts to remove the barriers to acquiring MOL Rt., upping pressure on the company’s management to accept its $20.6 billion bid.

In other recent company news:

  • Eni SPA has agreed to pay the higher price of £1.74 billion in cash for Burren Energy PLC, London, after Burren’s board rejected two previous offers as too low.
  • El Paso Corp. subsidiary Southern Natural Gas Co. (SNG) has agreed to acquire a 50% interest in a planned LNG terminal in Pascagoula, Miss.
  • XTO Energy Inc. has set a capital budget for development and exploration of $2.6 billion for 2008 compared with its 2007 budget of $2.4 billion.
  • Berry Petroleum Co. plans a capital budget of $295 million for 2008 compared with its 2007 capital budget of $320 million, which included $53 million for a Piceance acreage acquisition.
  • The appreciation of Thailand’s baht against the dollar has enabled PTT Exploration & Production PLC (PTTEP) to slash its capital expenditure in 2007-11 by 10% to 281 billion baht ($8.26 billion).
  • Petroleo Brasileiro SA (Petrobras) has entered into an agreement with ExxonMobil subsidiary TonenGeneral Sekiyu Kabushiki Kaisha to buy an 87.5% interest in the Japanese company Nansei Sekiyu Kabushiki Kaisha (NSKK) for about $50 million.

OMV moves to buy MOL

OMV has asked for the state-imposed 10% voting limitation to be revoked and has called on the European Commission to say that MOL has violated the principle of free movement of capital within the European Union. OMV also views as an obstacle MOL’s ability to remove a limited number of board members at a time.

OMV Chief Executive Wolfgang Ruttenstorfer has urged MOL’s board to consider a formal offer—or face an extraordinary general meeting. “The financial benefits of the offer we would be prepared to make and the strategic rationale have received a strong reception from both OMV shareholders and the shareholders of MOL,” he said. “We are again requesting that MOL’s board exercise their fiduciary duties by removing the impediments, allowing OMV to present a formal offer which can be decided upon by the shareholders. Failing that, we are prepared to initiate an EGM.”

OMV has repeated its desire to acquire MOL despite its rejection of the offer on the grounds that it is “value-destructive.” OMV’s offer this time is dependent on the caps on voting rights being removed, and the cancellation of the 40% of the shares controlled by MOL’s management. Legal proceedings have not changed its attitude to the takeover attempt, MOL said, because there is no “business rationale in a combination with OMV.”

Any shares bought using MOL’s resources should happen in a transparent and open manner, OMV urged, stressing that no economic rights should be attached to treasury and quasi treasury shares.

Last month, the EC asked the Hungarian government in a formal notice to explain “lex Mol,” the new law where takeovers of companies in “strategic” areas can be blocked using a new set of defences.

If Hungary fails to show that is acting within the remit of EU law, the EC will launch enforcement proceedings.

Eni raises price for Burren

Eni’s increased bid for Burren represents a 33.4% premium on the closing price of Burren’s shares on Oct. 8. Burren’s directors said they considered this deal to “be fair and reasonable” and plan to unanimously recommend it to the company’s shareholders.

Eni Chief Executive Paolo Scaroni said Burren was an attractive acquisition because it would increase its production in the Congo. Both are partners in the M’Boundi field. “We will also gain a first foothold in Turkmenistan, a hydrocarbons rich country which has increasingly attractive growth potential,” Scaroni said.

Korea National Oil Co. also has expressed an interest in Burren, raising the stakes that there may be a rival offer, but some analysts have signaled that they do not expect that to happen.

Scaroni told reporters in Venice that he expects to close the deal. “We’re on the right track and there are all the conditions to make us optimistic we can bring the transaction to a positive conclusion,” he said.

Burren dismissed Eni’s latest offer as not reflecting the full value of its assets (OGJ Online, Nov. 26, 2007).

SNG buys LNG terminal stake

The $1.1 billion Gulf LNG project, which received regulatory approval early this year, includes construction of two, 160,000 cu m storage tanks with a combined capacity of 6.6 bcf; 10 vaporizers, providing a base send-out capacity of 1.3 bcfd; and 5 miles of 36-in. pipeline connecting the terminal to the Destin, Gulfstream, Florida Gas Transmission, and Transcontinental Gas pipeline systems.

The terminal is expected to be placed in service in late 2011.

SNG will operate the facility and will manage its construction. Gulf LNG has negotiated 20-year firm service agreements for all of the terminal’s capacity.

Other partners in the Gulf LNG project are Houston-based investor Crest Group 30% and Sonangol USA 20%.

XTO sets E&P budget

XTO’s 2008 budget includes another $400 million for the construction of pipelines, compression equipment, and processing facilities.

Next year XTO expects to drill about 1,160 wells (980 net) and perform 750 (600 net) workovers and recompletions. The company will target $125 million for exploration.

XTO has oil and natural gas properties in Texas, New Mexico, Arkansas, Oklahoma, Kansas, Wyoming, Colorado, Alaska, Utah, Louisiana, Mississippi, and Montana.

Berry’s spending plans

For 2008, Berry Petroleum expects to drill more than 390 producing wells and is targeting 2008 production to average 30,000 boe/d. Total proved reserve additions are projected at 30 million boe.

The upcoming budget includes $173 million for heavy oil projects and $122 million targeting natural gas production growth.

The capital program assumes West Texas Intermediate crude prices of $70/bbl and Henry Hub natural gas prices of $7.50/MMcf, Berry said.

The company anticipates the capital expenditures will be fully funded through cash flow from operations.

PTTEP cuts spending plans

This year alone, the strong baht helped Thailand’s majority state-owned PTTEP to cut investment to 66.73 billion baht from 74.51 billion baht.

PTTEP has revised its projection on the baht to 35/dollar from 38.

About 80% of its costs were in dollars, the currency in which the company booked all its revenues, according to PTTEP Pres. Maroot Mrigadat.

However, the 5-year plan does not include costs that will exceed $1 billion for developing gas-prolific Block M9 in Myanmar’s Gulf of Martaban and Blocks 433a and 416b in Algeria.

PTTEP has engaged in 37 oil and gas exploration and development projects in the Middle East, Africa, and Asia, and it anticipates buying new gas and oil assets at home and abroad in a bid to increase reserves and capacity.

The company expects its 2008 petroleum sales to average 241,000 boe/d, up from a target of 188,000 boe/d this year as two major gas fields come on stream: Arthit field in the Gulf of Thailand and Block A-18 in the Malaysia-Thailand Joint Development Area.

Petrobras buys Japan refinery

The acquisition includes a 100,000 b/d refinery that processes light crude oil and high quality products, an oil and products terminal with storage capacity of 9.6 million bbl, three piers with capacity to receive product vessels of up to 97,000 dwt, and a monobuoy for very large crude carriers of up to 280,000 dwt.

Petrobras plans to use the terminal to boost its distribution of biofuels and to complement oil exports to Japan and elsewhere in Asia.

With this purchase, Petrobras will start refining operations in Asia for the first time.