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After failing to complete an initial public offering in London last year, independent oil and gas company Kuwait Energy may find a way to get access to the London Stock Exchange through a possible merger with a company already listed there.
Kuwait Energy is in merger talks with London-listed SOCO International, in what could be a merger of equals, Reuters reported on Monday, citing two sources familiar with the talks.
In May 2017, Kuwait Energy said that it would seek an IPO on the main market of the London Stock Exchange. At the time, Kuwait Energy expected the admission to take place in June 2017, and to raise gross primary proceeds of around US$150 million from an issue of new shares.
But at the end of June 2017, Kuwait Energy said that it had been unable to complete its IPO as announced in its Intention to Float in May.
“However, in light of positive feedback from potential investors, the Company remains committed to obtaining a London listing and continues to explore its options,” the firm said back in June.
According to Reuters sources from today, the possible merger would one of equals—two companies with similar operations and size, but very different geographical positions.
Kuwait Energy has assets in Iraq, Egypt, Yemen, and Oman. SOCO International, on the other hand, has interests in Vietnam, the Republic of Congo (Brazzaville), and Angola.
While SOCO International is in a stronger liquidity position and has more mature assets, Kuwait Energy has huge potential—it also has more debt and needs funding to realize that potential, one of Reuters’ sources said.
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As of June 2017, SOCO had cash and liquid investments balance of US$132 million with no debt, it said in the H1 2017 interim results release.
“With volatile oil prices, it makes sense for small oil companies to merge as getting bigger scale gives them balance sheet to face volatility. SOCO would get a portfolio of low cost, attractive assets, and for Kuwait Energy it would be a way to monetise some of their holdings,” Thomas Streater, head of investment research at MB Commodities Capital in Dubai, told Reuters.
By Tsvetana Paraskova for Oilprice.com
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Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews.