Burren Energy
10/24/2007
Attracting interest In response to recent potential takeover offers, management at Burren Energy (LSE, BUR) have declared that the proposals are ‘by a significant margin' short of recognising the mid tier oil producer's value. Not only have Italian oil major Eni SpA had their initial offer of 1050p rebuffed but offers from others at 1100p have also been sent packing. We believe however that Eni is still the front runner for a potential tie up. The Italians are already partners with Burren in the Congo where Eni is the operator of the M'Boundi field. This opens the door to synergies that other bidders would not be able to realise. Burren's other principle area of operation in Turkmenistan is in our view generating the wider interest shown by the industry. In the coming weeks we believe there will be further attempts to win over the Board, however a successful takeover is far from a certainty at this point. In the meantime, Burren's prospects as a standalone proposition remain healthy as September's interim results to 30 June highlight. Going forward we anticipate production in the second half to remain relatively flat. This is predominantly due to declines in M'Boundi production where Eni is initiating an optimisation programme. However, offsetting this decline is record production in Turkmenistan. Higher oil prices should provide earnings with support during this temporary period of stable production. Exploration and development away from Congo and Turkmenistan (across Egypt, Yemen and India) is also making progress, and should help underpin medium term production and earnings in our opinion. Financially, Burren has more than ample resources to tap in order to fund future growth. Besides strong cash flow and being debt free, Burren has nearly US$55 million in the bank. In addition, the company has arranged a new US$500 million loan facility in order to support potential acquisitions. Of course if Burren is taken over this may not be an issue. We believe this remains a very real possibility despite the failed initial attempts. The bottom line is, more large oil companies such as Eni will be on the lookout for mid-tier targets like Burren that have steady and rising production as well as high potential exploration acreage. These same qualities make the company an outstanding standalone operation as well. Burren's status as one of the UK's lowest cost oil producers is also appealing given the industry's battle with rising cost inflation. 
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