Junior gas explorer Metgasco (MEL) has announced to the Australian Stock Exchange (ASX) that it plans to merge with fellow ASX small-cap miner Elk Petroleum (ELK).
Elk is currently exploring oil reserves in the Rocky Mountains of the US and is in the process of building the Grieve oil pipeline in the American state of Wyoming.
The company has suffered a massive drop in its share price as a result of tumbling world oil prices. Elk shares, which were trading at $1.30 as recently as May this year, are now down to 40 cents.
Metgasco shares rose from 40 cents to 50 cents on the news.
Metgasco’s shareholders will own 77 per cent of the merged company with Elk shareholders taking the remaining 23 per cent.
In the short term the merged company will focus resources on bringing its US resources into production while it awaits the outcome of the suspension of its northern rivers exploration licence and a further government decision on its Casino production licence.
According to the statement, ‘Metgasco considers that significant NSW field activity has the potential to be further delayed until a stable regulatory framework is demonstrated and investment confidence has returned.’
Metgasco CEO Peter Henderson told ABC radio this morning, ‘We’re keeping our interests in the northern rivers region. We’re very enthusiastic about them we’ve spent a lot of money developing gas resources there… it’s a question of timing.
‘By taking this action with Elk it actually improves our chances of developing the gas resources in NSW,’ he added.