LONDON: Capricorn Energy plans to merge with Israel’s NewMed in an all-share deal after paying a $620 million special dividend to its shareholders, ditching a previous scheme to merge with Tullow Oil, according to Reuters.
The Capricorn-NewMed deal would create an Israel-Egypt focused gas producer including NewMed’s stake in Israel’s giant Leviathan offshore field at a time when Europe is looking for non-Russian energy supplies.
The new group would be listed under NewMed, formerly known as Delek Drilling, in London and led by Yossi Abu, the CEO of NewMed whose shareholders will own 89.7 percent of the merged entity.
Capricorn’s shares were trading up more than 10 percent after the announcement, hitting their highest since 2018. Tullow’s shares were down about 3.6 percent and NewMed down just under 1 percent.
Abu, in a call with Reuters, said the new group would aim to double its production to 200,000 barrels oil equivalent per day by the end of the decade from its current 115,000 boed.
“We are creating a company that for the first time allows international investors to get direct exposure to the East Med gas play and Leviathan in particular,” Abu said.
It will be the first Israeli company to own oil and gas assets in Egypt, a neighboring Arab state with a peace treaty with Israel and an energy-hungry population of around 100 million.
Israel already supplies gas to Egypt after discovering large resources off its coast in the 2000s.
The deal would value Capricorn shares at 271 pence, a 13 percent premium to its last closing price. The deal with West Africa-focused Tullow, which declined to comment on Thursday’s news, had valued Capricorn at around 210 pence per share.
Some Capricorn investors had come out against the Tullow merger plan.
“Capricorn and NewMed are pleased to announce a proposed combination to create a MENA (Middle East and North Africa) gas and energy champion and one of the largest upstream energy independents listed in London,” Capricorn said.
The merger would see Capricorn issue new shares to NewMed investors based on an exchange ratio of around 2.34 per NewMed share, which will see Capricorn shareholders hold just over 10 percent of the new company.
Capricorn’s Chief Financial Officer James Smith will stay on with NewMed Energy, which is set to pay out at least 30 percent of its cah flow in dividends.