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Sunday, 2 October 2022

Is Israel about to acquire a piece of Egypt’s oil and gas sector?

Israel’s NewMed could acquire Egypt oil + gas assets via Capricorn merger: Capricorn Energy has abandoned contested plans to merge with Tullow Oil in favor of an all-share tie-up with Israel’s NewMed, according to a joint statement (pdf) out Thursday. Under the proposed terms, shareholders of NewMed — formerly Delek Drilling, well-known partner in Egypt — would acquire almost 90% of the new company, receiving 2.337344 Capricorn shares for each existing share and paying out a USD 620 mn special dividend to Capricorn shareholders.

This would hand NewMed control of Capricorn’s assets in Egypt, paving the way for closer energy ties between Israel and Egypt and creating what the companies described as a “MENA gas and energy champion.”

WHY THIS IS GOOD FOR US- Egypt and Israel signed a landmark gas export agreement in June to ramp up exports to the European Union as it looks to phase out reliance on Russian fossil fuels. The agreement allows Israel to send more gas to Egypt’s LNG facilities for export to Europe.

Bigger production targets: The new group plans to raise its production to over 200k barrels of oil equivalent (boe) per day by 2030, up from 115k boe today, company CEO Yossi Abu said during a conference call, according to Reuters. NewMed is considering further developing its Leviathan gas field in a step that could further boost export volumes across the Mediterranean, he said, noting that one option to export more gas to Europe is via a new pipeline linking Israeli fields to Egypt’s LNG terminals.

What’s next: The merger is set to close in the first quarter of next year. The new firm would be listed under NewMed Energy on the London Stock Exchange (LSE) and would also pursue a Tel Aviv listing, according to the statement.

The bid trumps Tullow’s original offer: The takeover bid — including the special dividend payout — would value Capricorn shares at a 13% premium to their last closing price. It’s also a 29% premium to Tullow Oil’s original bid, which was criticized by stakeholders for undervaluing the company. NewMed’s bid values the company at USD 338 mn, according to the statement.

Capricorn’s operations here have faced hurdles lately: The company recently lowered its full-year production forecasts in Egypt due to “logistics and commissioning delays,” citing issues with bringing two rigs online. The company now expects to produce 33k-36k barrels of oil equivalent per day this year, down from its previous 37k-43k boe/d estimate.

BACKGROUND- Capricorn — formerly Cairn — has had a presence in Egypt ever since it acquired Shell’s oil and gas assets in the Western Desert with partner Cheiron last year, under an agreement worth up to USD 926 mn.

OTHER M&A NEWS-

Egytrans is looking at acquiring a transport company, it said in an EGX disclosure (pdf) last week, without disclosing which companies it’s considering. The company also denied what it said were rumors among traders about a potential acquisition of its shares at a share price of EGP 4.50, saying that it is not aware of any potential takeover bids targeting the firm.

Alex Medical is officially under new ownership: The Tawasol-LimeVest consortium received a 70.2% stake in Alex Medical (10.9 mn shares) for EGP 535.4 mn on Thursday, after its mandatory tender offer closed last week, according to an EGX bulletin.

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