The Argentina-focused energy company Andes Energia has bought its sector peer AHI through a share swap.
The deal means Andes gets assets in Paraguay, as well as two further sites in Argentina.
"These assets represent an enormous potential in conventional and unconventional resources," asserted Nicolas Mallo Huergo, Director of Andes.
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
"This move represents a diversification of our asset portfolio and provides Andes with solid platform from which to grow the E&P [exploration and production] business," he added.
Consideration for the acquisition of AHI will be satisfied through the issue of 117.1m ordinary shares of Andes and 7m warrants, with the latter being exercisable over a five year period at various prices, namely: 45p (1.5m warrants), 54p (1.5m) and 70p (4m).
For the year ended 31 December 2010, AHI had net assets of $1.8m, net current assets of $1.5m and no liabilities.
"The acquisition price of $78.4 per acre would indicate the acreage is of varying quality, and could need substantial capex [capital expenditure] to develop it," said Peter Bassett at Westhouse Securities.
"The company will acquire 2P [proved plus probable] reserves of 5.9m boe [barrels of oil equivalent] and risked conventional and unconventional prospective resources of 191m boe of oil and 8.1 Tcf (trillion cubic feet) of gas. This equates to prospective resources of around 1.5 billion barrels oil equivalent," Bassett noted.
"The 117.1 million shares to be issued represent 40% of the enlarged share capital," Bassett added.
"We would comment that the announced split between of Andes between the E&P business and the Argentine utility holdings has yet to take effect. Whilst the AHI deal could be a transformatory deal for Andes shareholders, it may need considerable capital to drill up the acreage," the broker concluded.
Andes shares rose 9.3% to 44p in the morning session.
BS
