UK-based oil explorer Burren Energy Plc and Italy's ENI said they had agreed to split a stake in a Congolese oil field that ENI sought to buy from France's Maurel et Prom, as Burren reported lower-than-expected profits.
Burren has agreed to pay ENI $155 million to buy an additional 5.5 percent stake in M'Boundi and a 2 percent interest in the Kouilou exploration licence, the same price on a pro rata basis that ENI agreed to pay Maurel et Prom, Burren Chief Executive Atul Gupta said.
The deal ends weeks of uncertainty about whether Burren would pre-empt ENI's agreement last month to buy the French firm's 48.6 percent stake in the M'Boundi field, and other Congo assets, for $1.4 billion.
"There will be a sigh of relief in some quarters (including ours) that Burren has not pre-empted the ENI/M&P transaction in full," Phil Corbett Oriel Securities said.
Burren already has a 31.5 percent stake in the M'Boundi field, which gave it the right to buy Maurel et Prom's stake by matching ENI's price.
Some analysts opposed a pre-emption, saying the field offered Burren little additional upside, but Gupta refuted this. "The big fields just get better with time," he said in a telephone interview.
Investors welcomed that the deal also would see ENI become operator of M'boundi and lead a programme to increase output by injecting water into the field.
Burren said in a statement on Monday that net profit rose 13 percent in 2006 to $249 million, due to tight cost control and higher oil prices, but the result was below the $258-$290 million range of forecasts in a poll of five analysts compiled by the company.
This was partly due to a deferred gross profit of $21.2 million, or around $10-$11 million net profit, a company spokesman said. Gupta said Burren was still in talks with the Turkmenistan government about a potentially lucrative contract to export gas from Burren's fields in the Central Asian country.
Burren is building infrastructure to facilitate exports, but Gupta said it was uncertain when a deal would be reached. Burren's strategy is to expand by using its cash position to buy assets, as with the M'Boundi stake, and to explore for oil and gas. Gupta conceded Burren's exploration record in 2006 was "not phenomenal", and some analysts prefer rivals, who are more focussed on exploration.
"Newsflow through 2007 is limited to modest exploration activity, water injection performance in Congo and a potential corporate/asset deal. The stock is becoming a direct play on the unpredictable oil price and investors may enjoy greater performance by investing in more materially active members of their peer group," Nathan Piper at Bridgewell said.