Glencore Will Purchase Chad Oil Firm Caracal

Written by Ann Brown

Apr 19, 2014

Mining company Glencore Xstrata has agreed to buy Chad-focused oil company Caracal Energy for about 800 million pounds, a deal that will allow the commodity giant to expand upstream in the oil sector.

The sale puts an end to Caracal’s proposed merger with Canada’s TransGlobe Energy Corporation.

Swiss-based commodity producer and trader Glencore agreed to pay 550 pence per share for Caracal, which has been its partner in Chad since 2012, the two companies said in a joint statement put out by Glencore on Monday. The price represents a 61 percent premium to Caracal’s closing share price on Friday.

Caracal said it had terminated the proposed merger with TransGlobe and had paid a break-fee of $9.25 million (5.52 million pounds) to the Canadian company for abandoning the deal, the statement said.

Caracal’s shares surged more than 58 percent in London after the announcement on Monday to 540.6 pence. Shares of TransGlobe were up 0.3 percent in Toronto by 1418 GMT.

“Glencore is already in Chad, so they’ll be knowledgeable of the assets, and oil is certainly an area that they have indicated they want to get into to a larger degree to create more diversification. So this acquisition fits in with their strategy,” said Investec analyst Marc Elliott.

In 2011, Caracal entered into three production-sharing contracts with the Republic of Chad which give the company and its partners exclusive rights to explore and develop reserves and resources in an area of southern Chad.

Glencore bought a 33 percent stake in those three contracts in 2012 and also acquired from Caracal a 25 percent share in the Magara and Badila fields which are expected to start exporting through the Chad-Cameroon pipeline later this year.