Mart Resources, Delta Oil terminate business agreement

22 December 2015, Lagos – Barely three months after Toronto- listed Mart Resources failed to convince Midwestern Oil and Gas Limited to buy it over, a second potential buyer, Delta Oil has also pulled out of the acquisition talks.

Mart ResourcesMart Resources has announced that that, due to prevailing market and industry conditions, Mart and Delta Oil Nigeria BV  have mutually agreed to terminate the arrangement agreement dated October 16, 2015.Mart and Delta have also mutually agreed that Delta will not proceed with the previously announced private placement of units, which was conditional upon shareholders first approving the Plan of Arrangement set out in the Arrangement Agreement.

Mart added that it intends to continue to examine and consider strategic alternatives available to the company to maximise shareholder value.

According to the company, FirstEnergy Capital of London, UK and Calgary, Canada will continue to act as Mart’s financial advisor in the strategic alternatives process.

Midwestern Oil and Gas, which has a partnership with Mart Resources in the 20,000 barrels per day Umusadege field, was the first company to be in talks to acquire the Toronto-listed company but the Nigerian independent later announced that it would not be able to complete the acquisition of the Canadian oil firm.

Under terms of the Arrangement Agreement between the two parties, as amended, Midwestern Oil had until August 19, 2015 to complete the Midwestern Financing.

But Toronto-listed Mart had said in a statement that Midwestern had informed it that  it would not be able  to complete the  Midwestern Financing  to acquire Mart at $0.80 per common share.

“Mart and Midwestern are continuing discussions regarding an alternative transaction at a lower price per Mart common share. There is no certainty that the discussions with Midwestern will result in an alternative transaction,” the statement added.

Following this development, Renaissance Capital said in a report that the negotiations between Mart and Midwestern might result in a new bid at a lower price, which would represent a potential upside risk to  investment.

According to the report, as at June 30, 2015, Mart had a total amount of debt outstanding of $200.5 million from GuarantyTrust Bank (GTB).

After considering the deferred principal repayments during the moratorium period, Renaissance said the loan amount due before June 2016 is $45 million, while the loan outstanding due after June 2016 is $154 million.

The report noted that if oil prices and Mart’s production do not pick up in 2016, Mart may struggle to meet its 2016 loan obligations.

Midwestern Oil and Gas Company Limited is the the operator of and one of Mart’s co-venturers in Nigeria’s Umusadege oilfield.
The Letter of Intent entered into by the two companies had set out the intention of Mart Resources and Midwestern on a non-binding basis, to use good faith efforts to negotiate and enter into a definitive agreement.

Under the definitive agreement, Midwestern would agree to acquire all of the issued and outstanding shares of Mart for cash consideration of CAD$0.80 (Canadian dollar) per common share by way of a plan of arrangement.

  • This Day
About the Author