In the deepest parts of the oceans, where food is scarce, lives a fish called the gulper.
Its mouth is so large and its stomach so elastic it can swallow creatures as large as itself. Like a gulper after a good meal, British independent Lasmo plc must have felt gorged when it took over Ultramar plc last December.
Before the takeover, Lasmo's market capitalization was about $1.94 billion. The bid was estimated at $1.9 billion, for which Lasmo gained 54.6% of Ultramar shares. However, debt made up a little more than 70% of the joint company's capital. That led analysts to suggest that Lasmo had been weakened and was ripe for takeover itself. Lasmo's share price fell as news of the takeover reached the markets.
WHAT LASMO GOT
The expanded Lasmo must have felt vulnerable at first, with upstream assets that needed rationalization and downstream assets to sell.
The depressed downstream sector looked like no place to dispose of two refineries with a combined capacity of 140,000 b/d, 1,500 branded service stations in eastern Canada, and a 100,000 b/d refinery and 400 retail outlets in California.
What made Ultramar so attractive to Lasmo was its acreage. Largely due to this deal, Lasmo has moved to No. 10 from No. 15 in overall U.K. oil and gas company rankings with a value of nearly $2.6 billion. In terms of involvement in U.K. acreage, however, the company has shot to No. 2 from No. 16 with interests in 18,765 sq km.
Ultramar also had attractive acreage in Indonesia.
On the basis that you must have somewhere to explore for oil, Lasmo must now be in a strong position.
The digestion of Ultramar progressed rapidly.
Lasmo recently created a new company, Ultramar Corp., to own the U.S. refineries and marketing operations. This completed the split of Ultramar into upstream and downstream segments for absorption and selloff, respectively.
An initial public offering of Ultramar Corp. stock is to be completed this month, which Lasmo expects to bring in $950 million to $1.05 billion. The company figures total net proceeds from Ultramar's downstream assets will amount to $1.175-1.275 billion, which compares with a book value of $1.583 billion at the time of the takeover.
Lasmo predicts a significant, rising cash flow during the next 5 years with fields starting production more than making up for the natural decline in current producers.
Off the U.K., Lasmo's Staffa fields went on stream in March at about 8,000 b/d. The Cohasset development off Nova Scotia started producing 52 gravity light sweet crude--"like whisky"--June 5. Ultramar's main Dutch asset, Markham field on the U.K.-Netherlands boundary in the North Sea, is due on stream this autumn.
ANALYSTS' ADVICE
With time, the position of Lasmo grows stronger. Now analysts are advising the purchase of Lasmo shares as a long term investment. This is remarkable in an oil and gas market that is Generally gloomy.
Whatever the final figure for the Ultramar Corp. stock sale, Lasmo will gain enough nourishment to grow from an independent into a major player.
Copyright 1992 Oil & Gas Journal. All Rights Reserved.
