Ophir shares soar as it catches the eye of Indonesian giant Medco

Medco’s potential bid for London-listed Ophir Energy would create a strong player in south east Asia, but could fall through over price disagreements, analysts said today.

Ophir's stock surged this morning after confirming talks with Medco over a potential offer for the business.

Shares rose by around a third to as high as 50.8p per share today, their highest point since July this year, before falling back to stand 25 per cent up at 44.6p in the afternoon.

“Should the deal go through, it would create a robust producer in south east Asia. Medco are clearly confident in their own ability to perform well given the uncertain outlook in the oil market,” CMC Markets analyst David Madden said.

Shares came within spitting distance of the 52p per share target price set by analysts at Jefferies.

However, despite the boost, Ophir Energy is still trading at a fraction of its approximately 320p share price at the beginning of 2014, and its long-suffering shareholders might be looking for a way out of the investment, AJ Bell said.

But the deal could still run into some snags, as Medco has not yet named its price.

“With oil prices still volatile, any deal could flounder over a lack of agreement on what represents a fair value for the business,” Russ Mould, investment director at AJ Bell, said.

Shareholders will now expect Medco to come up with a concrete bid by the close of play on 28 January.

The Jakarta-listed energy and natural resources company is valued at around $900m. The deal for Ophir would allow it to expand further abroad, cementing its position as one of the biggest non-nationalised oil producers in southeast Asia.

“This will help Medco shape up as an international player. It seems to be pursuing a transaction at the bottom cycle of the oil price to try and offer scope to re-rate its stock,” said William Simadiputra, an analyst at DBS Vickers Securities in Jakarta.