San Leon Energy Plc (SLE), the gas explorer backed by billionaire George Soros and Blackrock Inc. (BLK), will buy Realm Energy International Corp. (RLM) for $142 million in shares and cash to increase shale acreage in Poland.
San Leon will pay C$1.30 ($1.32) a share, a 46 percent premium to Realm’s current price, and the deal is expected to close in November, San Leon said in a statement in London today. Realm holders will get cash for some shares and receive 3.3 ordinary shares of San Leon per share for the rest.
Shale gas technology, which unlocks natural gas from underground rocks by grinding them with sand, chemicals and water, has boomed in the U.S. and delivered the lowest prices in almost a decade. San Leon is competing with Exxon Mobil Corp. (XOM), Chevron Corp. (CVX) and Talisman Energy Inc. (TLM) in Poland, where the company says basins are similar to those in the U.S.
“This makes us one of the biggest shale gas players in Poland,” San Leon Chairman Oisin Fanning said in a telephone interview. “Europe desperately needs this energy, otherwise they’ll pay high prices to Russia, Iran or Qatar.”
San Leon fell 3.9 percent to 18.5 pence at the close of trading in London.
Eastern Europe may hold as much as 7.1 trillion cubic meters of shale gas, the U.S. Energy Information Administration estimates. Poland alone may sit atop about 5.2 trillion cubic meters, equal to more than 300 years of domestic consumption.
After the acquisition, San Leon will hold 28 concessions and licenses in seven countries, with a focus on Poland, Morocco and Albania. The company plans to drill 16 wells over the coming year, according to the statement. Realm shareholders will have 36.9 percent of the enlarged company.
Soros, who owns more than 20 percent of San Leon, was “clearly supportive” of the acquisition, Fanning said. While the shares have declined more than 20 percent this year as the stock market fell on concerns that global growth is slowing, Fanning said investors want to be rewarded with drilling success.
San Leon’s exploration program is fully funded, Fanning said. The Realm acquisition also gives the company acreage in France and Spain, as well as $24 million in cash from Realm’s balance sheet.
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