American Patriot in takeover talks

Published at Feb 23, 2016, in Energy

Even at a time of low oil prices, junior oil and gas play American Patriot (ASX:AOW) has received a takeover offer from a joint venture partner in the US valuing it at $35 million – just under three times its current market cap.

The oil play told its shareholders today that it had received an offer from private company Running Foxes Petroleum to take over the shares of AOW for 22c each. AOW’s current share price is 14c.

Running Foxes is a joint venture partner of AOW at its Rough House oil project in Colorado, having farmed into the project this month.

For the meantime, AOW has advised its shareholders to take no action on the offer – wanting to run the offer by major shareholders first.

Still, the offer from a partner which has farmed into a project just this month is a sign that the company’s strategy is working — according to AOW CEO Alexis Clark.

“To receive an offer from Running Foxes for the entire company in an oil market that is both challenging and volatile is a testament to the quality of the assets and the business model we have created,” he said in a statement.

AOW holds a number of oil and gas leases in four states of the US, with the Northern Star project in Montana and the Rough House project in Colorado considered the leading assets.

Its overarching strategy is to work up assets to a point where it can farm them out to a bigger partner, while retaining a working interest in the asset and more often than not receiving a free carry on wells in the program.

In the case of Running Fox, it farmed into Rough House earlier this month, taking a 70% operating stake in the asset and committing for up to five wells.

Interestingly, this is not the first time AOW has received a transaction offer.

In September last year it received an offer from a private company headed up by Edward Mike Davis to buy the assets of AOW for $20 million in cash.

AOW knocked back the deal, calling it “opportunistic” and wanting to test the market for a higher offer.

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