BP has made a bid to acquire US oil explorer and producer Penn Virginia Corp, according to sources familiar with the matter that spoke to Proactive Investors UK. BP has reportedly offered $8 a share for the US company, which engages in E&P activities in the US Lower 48. Penn currently has a market cap of approximately $319.2 million.
Penn’s stock price soared by almost 23% Thursday on the news before falling back to close at $4.98 (+12%). This was the largest one-day gain since December 2014.
Later Thursday Penn Virginia said in a statement that “it has no comment on market rumors and that it did not issue a press release earlier today [Thursday].”
The sources told Proactive Investors UK that Penn rejected BP’s takeover bid because it considers the terms offered undervalue the company. Penn Virginia is reportedly holding out for at least $10 per share, Proactive Investors reported.
Penn describes itself on its website as an independent oil and gas company engaged in the exploration, development and production of oil, NGLs and natural gas in various domestic onshore regions of the US, with a primary focus in the Eagle Ford Shale of south Texas.
Penn Virginia’s operating areas, as of September 30, 2014
Proactive Investors reports that BP’s peers, such as ExxonMobil and Chevron, may also be interested in acquiring the company.
As oil prices have fallen over the past year, Penn Virginia’s share price has dropped to approximately $4.50 per share from just below $17 per share in June 2014.
Penn decided in 2010 to follow many of its US peers in shifting its focus from natural gas toward higher margin oil and NGLs. In January 2014, the company sold its natural gas assets in south Texas and divested its assets in Mississippi in July last year to focus on oil-weighted assets in the Eagle Ford.
Penn has reportedly appointed Bank of America to assist it in his search for possible buyers.
An oil analyst in London spoke on condition of anonymity to Proactive Investors UK, saying that BP has been rationalizing its business in the US after the 2010 Macondo incident. He said, “It’s a good time to buy cheap assets for majors trying to replace reserves and production.”
The analyst added, “Consolidation in the US has to happen and there are players with deep pockets who would take out some smaller US independent explorers and producers who may not be able to fund their production themselves.”
Meanwhile, Tudor Pickering said in a note Friday that BP could do a deal at least the size of Penn Virginia’s $1.8bn enterprise value, as BP needs to strengthen its liquids position in the US.
In 1Q15, Penn raised output in the Eagle Ford by 23% to 21,390 boepd from 4Q14. As of October 2014, it owned approximately 104,300 net acres in the Eagle Ford and said it intended to additionally increase its acreage position near its existing holdings. The company said its lease position gave it more than 1,600 drilling locations (or about 12 years of drilling sites).