Coro Energy backs out of Bulu acquisition

As a result, the AIM-traded firm said would no longer proceed with the acquisition of a 42.5% interest in the Bulu PSC, offshore Indonesia, after it announced the revised terms of that on 18 July.

As it had previously indicated on 3 December, the long stop date for completion under the Bulu acquisition agreement had passed without the Bulu acquisition having completed and that, with regulatory governmental approval processes continuing, the parties were in the process of negotiating a further six-month extension to the long stop date.

That was in order to accommodate the additional time required for the approvals to be received.

Following the recent successful drilling campaign on the Duyung PSC, together with the growing number of sizeable merger and acquisition opportunities in the region, Coro said it could be selective about the assets it chose to bring into its portfolio.

“In that context, with the approvals still outstanding and there being concerns around the future of the operating partner, the potential changes to the composition of the Bulu partnership group and the possibility of new requirements being introduced in satisfying the plan of development at Bulu, the board views the risks associated with the Bulu acquisition from Coro's perspective to have significantly increased,” the board explained in its statement.

“As such, the company will not be entering into an extension and has allowed the Bulu acquisition agreement to lapse in accordance with its terms.

“The Bulu acquisition will not therefore proceed.”

Coro said the consideration for the acquisition, which would not now be paid by the company, was to be satisfied through total payments, in tranches, of $6.94m in cash, together with an additional $1.04m in working capital adjustments to AWE.

In addition, the firm was to pay an additional $4m by way of the issue of new Coro ordinary shares to Hyoil Bulu.

With the Bulu acquisition not proceeding, the board said that consideration would no longer be paid, preserving Coro's cash balances to progress other areas of its portfolio, including the Duyung PSC, and removing the need to issue further new ordinary shares in relation to the transaction.

Overall, Coro's net expenditure specific to the transaction had amounted to around $0.25m.

“As we look to build our portfolio, we recognise the importance of being highly selective in identifying the right projects to pursue whilst also managing our funds in the best interests of shareholders,” said chief executive officer James Menzies.

“We are excited by the opportunities we see to build a business of scale in South East Asia, with a portfolio that would include both current production as well as both long- and near-term growth assets.

“With that in mind, the increased risks around the Bulu project have led us to terminate the transaction, allowing us, with 2020 shaping up to be a highly active merger and acquisition market in the region, to focus our resources on opportunities that can provide near-term impact on the company and value to its shareholders.”

At 1442 GMT, shares in Coro Energy were up 1.59% at 1.6p.