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Farewell to Fusion

IN THE nick of time, Sterling Energy, a London AIM-listed group, completed its hostile bid for the Australian minnow, Fusion Oil&Gas. After a three-month takeover battle, strongly resisted by the Fusion board, the UK firm finally announced, on 4 December—the closing date for the offer—that it had gained control of more than half the company's shares. In the end, Sterling's offer of 3.5 of its own shares or 2.5 shares plus £0.10 ($0.17) for each Fusion share was just enough to win investors around.

The Fusion board had sought a better offer, arguing that the bid greatly undervalued the company and that Sterling would not know what to do with the assets it was acquiring. With an enticing offshore portfolio along the west African coastline, Fusion is a pure exploration play. Sterling, however—a low-risk producer with assets in shallow water in the Gulf of Mexico—is not a noted explorer.

The acquisition gives Sterling a whole new look, however. The greatest prize is Mauritania, where Fusion has helped pioneer offshore oil exploration work in recent years. Fusion held small stakes in two discovery wells, Chinguetti and Tiof, in a consortium led by a fellow Australian firm, Woodside Energy. It also held an interest in a number of planned exploration wells, as many as 15 over the next few years. The company had negotiated a deal with the UK's Premier Oil to relinquish its Mauritanian interests on completion of a development plan for which it would receive a return based on eventual oil production.

Besides Mauritania, Fusion held further upstream assets in Gabon, Cameroon, Guinea-Bissau and the joint co-operation zone between Guinea-Bissau and Senegal. It also held a technical co-operation agreement for the entire offshore region of the so-called Saharawi Arab Democratic Republic, the disputed Western Sahara region below Morocco.

Sterling—led by its chief executive, Harry Wilson, a former BP man—has strong ambitions to grow. A spokesman for the company says the acquisition fits in neatly with the company's aspirations, with a spread of assets offering good upside potential in a new continent.

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