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By Davide Barbuscia
DUBAI (Reuters) - SOCO International, an oil and gas exploration and production company listed on the London Stock Exchange, said on Monday it was evaluating a merger with Middle East oil and gas firm Kuwait Energy.
A merger would provide a way for the Kuwaiti company to go public after it failed last year to complete an initial public offer of its shares on the London exchange, through which it hoped to raise about $150 million.
"SOCO confirms that, in the context of its stated objective to strategically reshape its business and grow its portfolio, it is evaluating a potential merger of equals with Kuwait Energy," the company said in a statement issued via the London Stock Exchange.
"With volatile oil prices, it makes sense for small oil companies to merge as getting bigger scale gives them balance sheet to face volatility. SOCO would get a portfolio of low cost, attractive assets, and for Kuwait Energy it would be a way to monetise some of their holdings," he said.
The potential merger would be "a merger of equals, two companies with very similar size and operations, but different geographic exposures", said one of the sources, who did not want to be named because the discussions are private.
"The difference is that SOCO has a slightly more mature or developed asset base and is in a stronger liquidity position. Kuwait Energy has a less mature asset base with huge potential, but it is more leveraged and needs to fund a substantial capital expenditure requirement to realise the potential."
The Kuwaiti firm announced last June that it had not been able to complete the IPO. It did not give a reason, but said that in light of positive feedback from potential investors, it remained committed to obtaining a London listing and continued to explore its options.
Kuwait Energy also announced last month that it had agreed to extend the maturity of the principal repayment of a $155 million convertible loan due in November 2017, partially held by private equity group Abraaj.
(Editing by Andrew Torchia and Susan Fenton)
(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)