Singapore — Indonesian oil and gas group Medco Energi is in talks to buy UK-based Ophir Energy to create one of the biggest private upstream producers in Southeast Asia, the two companies said separately.

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Shares in London-listed Ophir -- an oil and gas company with upstream assets in Thailand, Vietnam, Indonesia, Malaysia, Equatorial Guinea and Tanzania -- jumped in trading Wednesday, valuing it at GBP325 million ($414 million). The possible deal was announced Monday.

Medco Energi, with a market capitalization of around $900 million, has oil and gas exploration and production assets mainly in Indonesia, but has been expanding into Oman, Yemen and the US.

Combined with Medco's 2018 target production 85,000 boe/d, Ophir's output of 25,000 b/d of oil equivalent would take an enlarged Medco's production to 110,000 boe/d, more the 90% of which would be within Southeast Asia, energy consultancy Wood Mackenzie estimated Wednesday.

"This is a bold move by Medco, and if successful would create a Southeast Asian upstream powerhouse," Wood Mackenzie research director Angus Rodger said in a note. "This would catapult the firm into being the seventh largest non-NOC upstream producer in Southeast Asia, above Hess and BP, and just behind Repsol and Total."

PIVOT TO ASIA

Rodger said the deal would also bulk up Medco's non-Asian exposure by adding growth options in Tanzania and Equatorial Guinea to existing positions in Libya, Oman, Yemen, Tunisia and the US.

"It would also offer exposure to the global upstream hotspot that is offshore Mexico, where Ophir recently secured participation in three blocks," Rodger said.

He said after Ophir's acquisition of Santos's Asian assets last year, the explorer appeared to have pivoted its portfolio towards Asian growth, given its troubled Fortuna FLNG project in Equatorial Guinea was struggling to attract finance.

Medco Energi is also operational in the natural resources and power sectors, with gas, geothermal and hydro power plants in Indonesia through its 88% stake in Medco Power and a 39% interest in an Indonesian copper and gold mine.

Medco Energi said the purpose of the deal was "business development...there [is] no offer price determined, the amount of funds to be made for the cash offer, (or) the number of securities to be purchased."

Under UK takeover rules, Medco Energi must announce a firm intention to make an offer for Ophir by January 28 or announce that it does not intend to make an offer.

--Eric Yep, eric.yep@spglobal.com

--Robert Perkins, robert.perkins@spglobal.com

--Edited by Dan Lalor, newsdesk@spglobal.com