Horizon, Roc May Seek Asia Assets After $739 Million Transaction

Australian oil and gas producers Horizon Oil Ltd. (HZN) and Roc Oil Co. (ROC) may seek to buy new assets in Asia after they agreed on a A$800 million ($739 million) deal to combine their operations stretching from China to Malaysia.

The transaction comes amid an acceleration of acquisitions in the sector, led by L1 Energy’s agreement to buy RWE AG’s Dea oil and gas unit that valued the assets at about 5.1 billion euros ($7.1 billion). Oil and gas deals rose 37 percent to $85.2 billion in the three months to March 31 from $62.1 billion in the previous quarter, according to data compiled by Bloomberg.

“There is a deal flow in Asia for those companies that have the funding and operational capability,” Horizon Chief Executive Officer Brent Emmett, who will retain his post in the new company, said today in a phone interview. “The merged company will be very well placed to take advantage of those opportunities.”

There may be assets available in Asia as North American producers divest projects in the region to focus on shale oil or shale gas options in the U.S., according to Emmett.

Horizon shareholders will have 58 percent of the new company and holders in Sydney-based Roc will have 42 percent under the proposal, the companies said today in a statement. Horizon holders will receive 0.724 Roc shares for each share they hold.

Stock Value

The value of the stock being offered by Roc is about A$424 million. Horizon shares fell 4.1 percent to 35.5 Australian cents at the close in Sydney, while Roc shares fell 1.1 percent to 45 Australian cents.

Combining Woolloomooloo, New South Wales-based Horizon and Roc would create a company with assets in six countries including China, Malaysia, Australia and New Zealand, the two producers said today in a presentation. The new entity has not yet been named and will be based at Horizon’s current headquarters, Emmett said. It will have reserves of 36.9 million barrels of oil equivalent and output this year of 5.5 million barrels.

The deal, which the companies will seek to complete by August, requires approval by Horizon shareholders and would trigger Horizon bondholders’ rights to redeem convertible notes, the companies said.

Both boards have offered unanimous support for the deal, Emmett said. “It would be fairly evident to any unsolicited bidder that they are not going to be able to obtain control.”

Roc is being advised by J.B. North & Co. and Herbert Smith Freehills, with Horizon advised by UBS AG and King & Wood Mallesons, according to the statement. The deal requires regulatory approval.

To contact the reporter on this story: David Stringer in Melbourne at dstringer3@bloomberg.net

To contact the editors responsible for this story: Jason Rogers at jrogers73@bloomberg.net Abhay Singh

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