Tethys Oil AB (SSE: TETY): Take-over offer at SEK58.70 per share
• Tethys has received a cash offer from Roc Oil to acquire the company at SEK58.70 per share.• The offer is recommended by the independent bid committee of the board of directors of Tethys.
• Shareholders representing 16.86% of the outstanding shares have irrevocably undertaken to accept the offer.
• The offer represents a premium of almost 90% to Tethys’ share price on the day prior to the announcement and has a 90% acceptance condition.
• The acceptance period for the offer is expected to commence on or around 28 October and expire on 02 December. By then, the high impact Kunooz well will have been drilled. This is a very material well and in case of success, Tethys shareholders might seek a higher price to sell the company .
• We also note that if Tethys receives an alternative cash offer at a price 12.5% or more above Roc Oil’s, Roc Oil would have the opportunity to match this offer, failing which the shareholders who have provided undertakings would be entitled to withdraw their undertaking to accept Roc Oil’s offer.
• The Kunooz well is targeting 123.5 mmbbl unrisked prospective resources (unrisked NAV of ~SEK200 per share).
• We therefore view the offer by Roc Oil as a put option with a strike price of SEK58.70 per share if the Kunooz well is dry. Tethys’ shares currently trade below the this price , which suggests an asymmetric return in favour of existing shareholders.
• We have set our target price at SEK80 per share in line with the offer price (SEK58.70 per share) plus 50% of our risked value for Kunooz (50% of SEK44 per share).
• We believe that the main residual risk associated with the offer is Roc Oil obtaining any required Chinese foreign exchange control approvals.
Valuation
The offer for the company (SEK58.70 per share) is very close to our ReNAV for the company based on Blocks 3&4 plus Block 56 (SEK54 per share). Our ReNAV for Kunooz on Block 58 is SEK44 per share. The overall unrisked value of the prospective resources at Block 58 alone (453.9 mmboe) is >SEK700 per share.
Tethys Petroleum is an oil and gas exploration and production company focused on projects in Central Asia. Through its subsidiaries, Co. is engaged in the exploration for, and the acquisition, development and production of, oil and natural gas resources in Kazakhstan, Tajikistan and Uzbekistan.
Auctus Advisors is a specialist Equity Capital Markets and Advisory business with a focus in the Energy Sector.
The partners have complementary skill sets, with decades of experience across Equity Capital Markets, Investment Banking and the Energy industry. We have worked at Société Générale, Canaccord Capital, BMO Capital Markets and Schlumberger. Most recently we have worked together for many years at GMP FirstEnergy.
Auctus has been set up at the beginning of a new decade in which we see significant opportunities in the Energy space. Globally, demand for energy is at record levels and continues to grow. Conversely, investment in traditional energy sources has been severely constrained. We believe this imbalance creates opportunities for both companies and investors.
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