10 July 2009
FOR IMMEDIATE RELEASE
Venture Production plc rejects Centrica plc's offer
The Board of Venture Production plc ('Venture' or the 'Company')
notes the announcement by Centrica plc ('Centrica') of an
unsolicited final offer for Venture of 845p per ordinary share.
Following a Board meeting, and having consulted its financial
advisers, the Board has unanimously concluded the offer is not in
the best interests of shareholders and should be rejected by
shareholders.
The Board has concluded that Centrica's offer substantially
undervalues Venture given its near and long term prospects and the
strategic position and high quality of its UK gas reserves and
resources:
Venture:
-is the leading independent gas producer in the North Sea
-has a large portfolio of assets with material upside
potential
-has a sustained track record of delivering growth and value
-has the operational and technical expertise needed to exploit
the North Sea opportunity set
-has the financial strength needed to exploit both existing
portfolio and strategic opportunities
Leading independent gas producer in the North Sea
Venture is the leading independent gas producer in the North Sea
and the ninth largest holder of UK North Sea gas reserves. Venture
is forecast to be the tenth largest gas producer in the UK North
Sea in 2009 and the only company within the top 10 whose production
is forecast to rise over the next three years. In the southern
North Sea, Venture has proved and probable gas reserves of
approximately 1.1 Tcfe (approximately 180 MMboe) with substantial
additional potential resources totalling approximately 2.7 Tcfe
(approximately 450 MMboe) on an unrisked basis.
Venture's gas reserves are:
-Strategically located close to the UK market, the third largest
OECD natural gas market and one which is increasingly dependent on
imports. As overall North Sea production continues to decline,
Venture's growing gas reserves are expected to become more
strategic due to their low political risk and security of energy
supply considerations.
-Largely uncontracted, enabling Venture to capture further value
from the UK's increasing reliance on gas imports and the
anticipated strengthening of energy prices as reflected in forward
markets.
-Geographically well positioned to supply the Continental
European gas markets as well as the UK.
Large portfolio of assets with material upside potential
Venture has a large and diversified asset base that has material
current production, a broad portfolio of development projects and
an exciting spread of exploration acreage. It has interests in 92
UK and Dutch North Sea licence blocks containing 48 proven oil and
gas fields of which only 21 are in production today. A substantial
proportion of Venture's reserves are in undeveloped fields,
including large equity positions in a number of the UK North Sea's
largest undeveloped gas fields. Venture is the largest net holder
of UKCS exploration acreage and was the largest recipient of 25th
UK Licensing Round awards in 2008. This broad exploration portfolio
positions Venture to continue delivering strong organic growth in
the medium term. Venture has an exciting exploration and appraisal
drilling programme of 12 wells over the next 12 months, targeting
264 MMboe1 of net unrisked reserves.
Proved and probable reserves as at 31 March 2009 totalled 240
MMboe1. This is supported by DeGolyer and MacNaughton's independent
evaluation of proved and probable reserves of 243 MMboe1. In
addition, DeGolyer and MacNaughton identify possible reserves of
229 MMboe1 and contingent resources of 71 MMboe.
The recent announcement of a proposed sale and farm out of 9.3
MMboe proved and probable reserves in the southern North Sea to
Nuon2 for £96.5 million (US$158 million3) represents a value
equivalent to $17.0/boe.
Resource Investment Strategy Consultants ('RISC') has been
engaged to conduct an independent valuation of all of Venture's
reserves and contingent and prospective resources.
Sustained track record of delivering growth and value
Venture has a long track record of delivering growth and value
whilst maintaining operational and capital discipline. The growth
has been delivered through a focused strategy of identifying,
integrating and exploiting carefully selected acquisition targets.
These include the acquisitions of CH4 Energy Ltd and WHAM Energy
plc and multiple acquisitions across the Chestnut, Cygnus, Greater
Kittiwake Area ('GKA'), 'Trees' and 'A' Fields areas.
In 2009, Venture has continued to build on its record 2008
financial and operating performance with an increase in first half
production of 16%, from 45,700 to 52,900 boepd. Venture's five year
average reserve replacement ratio (including acquisitions) to the
end of 2008 was 288%, during which period its reserves have grown
by 128% to 214 MMboe. Reserves have increased by a further 12% to
240 MMboe in the first quarter of 2009. Subsequent to this, during
the second quarter, Venture has had additional drilling success on
the Cygnus and Kew fields.
Operational and technical expertise needed to exploit North Sea
opportunity set
Since its entry into the North Sea, Venture has built a strong
operating and technical capability across the exploration,
appraisal, development and production phases. Venture's operating
capability and strong contractor relationships have enabled it to
deliver a track record of creating value in a challenging operating
environment. Venture maintained its operational momentum in the
second half of 2008 by bringing three new fields into production
and is currently involved in five significant development projects
due on stream prior to the end of 2011. To date in 2009, Venture
has a 100% drilling success record from three appraisal wells and
one exploration well. Two further wells are in progress: an
appraisal of an East Irish Sea gas discovery; and an exploration
well in the 'A' Fields area.
Venture believes its technical and commercial skills and
innovative approach to unlocking challenging reservoirs will be
critical to the successful exploitation of the next generation of
more complex undeveloped fields in the North Sea.
Financial strength needed to exploit both existing portfolio and
strategic opportunities
Venture is in a strong financial position both to develop its
existing portfolio and to continue pursuing its proven strategy of
acquiring 'stranded reserves' in the North Sea - and then rapidly
investing to unlock additional value. It is anticipated that
capital expenditure in 2009 will be largely funded from operating
cash flow. As at 30 June 2009, Venture had a fully committed £365
million bank facility, which is undrawn other than letters of
credit and cash on its balance sheet of £147.4 million.
Opportunistic approach by Centrica that undervalues Venture
The Board of Venture believes that Centrica's initial
acquisition of shares and subsequent offer are opportunistic.
-Its initial acquisition in March was made at a time of
significant weakness in both the equity and energy markets. Since
that time, the share prices of Venture's peers in the UK E&P
sector have risen substantially.
-In the last budget, the UK Government improved the tax regime
for the development of small fields in the North Sea and this bodes
well for the future fiscal stability of the region for upstream
developers.
-The value per barrel implied in Centrica's offer is materially
below the average achieved in the sale of comparable large North
Sea asset portfolios in recent years.
The Board believes that Venture's high quality gas reserves and
resources and strong operational capability are of significant
strategic value to Centrica. This strategic value is clearly not
reflected in the price that Centrica has offered.
Venture advises shareholders to reject Centrica's offer
Mike Wagstaff, Chief Executive, Venture Production, said:
"We are the leading independent gas producer in the North Sea.
In no way does this offer recognise the strategic position and high
quality of our UK gas reserves and resources for which the markets
have clearly and consistently established significantly higher
values across a number of recent transactions. Our strong financial
position enables us to exploit both our existing strategic
portfolio and future acquisition opportunities."
Venture shareholders should note that Centrica's offer is final
and will not be increased, except that Centrica reserves the right
to revise and/or increase its offer if a competitive situation
arises. Should Centrica therefore not satisfy the minimum
acceptance condition under its offer, the offer will lapse and
Centrica cannot make a further offer for 12 months without the
consent of the Takeover Panel.
A copy of this announcement may be viewed at
www.venture-production.com
Dealing Disclosure Requirements:
Under the provisions of Rule 8.3 of the Takeover Code, if any
person is, or becomes, 'interested' (directly or indirectly) in 1%
or more of any class of 'relevant securities' of Venture, all
'dealings' in any 'relevant securities' of that company (including
by means of an option in respect of, or a derivative referenced to,
any such 'relevant securities') must be publicly disclosed by no
later than 3.30 pm (London time) on the London business day
following the date of the relevant transaction. This requirement
will continue until the date on which the offer becomes, or is
declared, unconditional as to acceptances (or, implemented by a
scheme of arrangement, such scheme becomes effective), lapses or is
otherwise withdrawn or on which the 'offer period' otherwise ends.
If two or more persons act together pursuant to an agreement or
understanding, whether formal or informal, to acquire an 'interest'
in 'relevant securities' of Venture, they will be deemed to be a
single person for the purpose of Rule 8.3.
Under the provisions of Rule 8.1 of the Takeover Code, all
'dealings' in 'relevant securities' of Venture by Venture,
Centrica, or by any of their 'associates', must be disclosed by no
later than 12.00 noon (London time) on the London business day
following the date of the relevant transaction.
A disclosure table, giving details of the companies in whose
'relevant securities' 'dealings' should be disclosed, and the
number of such securities in issue, can be found on the Takeover
Panel's website at http://www.thetakeoverpanel.org.uk/new/.
'Interests in securities' arise, in summary, when a person has
long economic exposure, whether conditional or absolute, to changes
in the price of securities. In particular, a person will be treated
as having an 'interest' by virtue of the ownership or control of
securities, or by virtue of any option in respect of, or derivative
referenced to, securities.
Terms in quotation marks are defined in the Takeover Code, which
can also be found on the Panel's website. If you are in any doubt
as to whether or not you are required to disclose a 'dealing' under
Rule 8, you should consult the Panel.
Enquiries:
Venture Production plc
Mike Wagstaff, Chief Executive
Brunswick Group LLP
Patrick Handley, Camilla Gore
Telephone:
+44 122 461 9000
+44 207 404 5959
The Directors of Venture accept responsibility for the
information contained in this announcement. To the best of
knowledge and belief of the Directors, who have taken all
reasonable care to ensure such is the case, the information
contained in this announcement is in accordance with the facts and
does not omit anything likely to affect the import of such
information.
N M Rothschild & Sons Limited ('Rothschild'), who is
authorised and regulated by the Financial Services Authority in the
United Kingdom, is acting as financial adviser to Venture and no
one else in connection with the proposed offer and will not be
responsible to anyone other than Venture for providing the
protections afforded to clients of Rothschild or for providing
advice in relation to the proposed offer.
Lambert Energy Advisory Limited, who is authorised and regulated
by the Financial Services Authority in the United Kingdom, is
acting as financial advisor to Venture and no one else in
connection with the proposed offer and will not be responsible to
anyone other than Venture for providing the protections afforded to
clients of Lambert Energy Advisory Limited or for providing advice
in relation to the proposed offer.
UBS Investment Bank, who is authorised and regulated by the
Financial Services Authority in the United Kingdom, is acting as
financial advisor and broker to Venture and no one else in
connection with the matters set out in this announcement and will
not be responsible to anyone other than Venture for providing the
protections afforded to clients of UBS Investment Bank or for
providing advice in relation to the proposed offer.
Oriel Securities, who is authorised and regulated by the
Financial Services Authority in the United Kingdom, is acting as
financial advisor and broker to Venture and no one else in
connection with the matters set out in this announcement and will
not be responsible to anyone other than Venture for providing the
protections afforded to clients of Oriel Securities or for
providing advice in relation to the proposed Offer.