Could this rumoured merger send the Harbour Energy share price flying again?

The Harbour Energy share price blipped upwards briefly in response to rumours, but it dropped back quickly. So what’s going on?

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

The name Harbour Energy (LSE: HBR) is a relatively new one in the oil and gas exploration business. But the company behind it, previously known as Premier Oil, certainly isn’t. The name change following Premier’s merger with Chrysaor Holdings hasn’t done a lot for the new Harbour Energy share price, mind.

The shares have been dipping in 2021. But in the past month or so, renewed interest appears to have been pushing them upwards again. So what’s happening?

I’ve owned shares in this company in the past, in its Premier Oil incarnation. Back then, I think I escaped lightly with a small loss when I sold. Despite what I saw (and still see) as decent assets and a promising exploration programme, the big problem is debt.

We have yet to see any results from Harbour. But Premier Oil did deliver a final set of full-year figures in March. And that statement predicted post-merger net debt for the new company of $2.9bn. That’s better than the previous figure of $3.2bn, but it’s still an eye-watering sum.

Merger on the cards?

I’ve always thought some sort of refinancing or restructuring was going to be needed. And we learned of one possible way forward this week. According to reports from several sources, including Bloomberg, there could be a new merger on the cards.

Neptune Energy, an explorer backed by private equity, is apparently thinking about a merger with Harbour. Neptune, part owned by Carlyle Group and CVC Capital Partners, is understood to be in talks with its advisors.

If the mooted deal should come off, it would result in a combined business worth around $10bn. At least, that’s according to “people familiar with the matter“, as the reports are describing them. It would make it one of Europe’s biggest independent oil and gas companies.

Harbour Energy share price reaction

But I’m going to make no assumptions at this stage. And the market reaction has been, at best, mixed.

On Tuesday, the day the news broke, the Harbour Energy share price rose by 7% at its intra-day high. But that quickly subsided. And as I write on Wednesday, the price has dropped back below where it started. I wonder if investors were expecting something official in response to the reports, as often happens? Well, we haven’t heard a peep from either Harbour or Neptune.

So, what would I do now? There’s an old investment saying that goes “buy the rumour, sell the news“. The idea is that rumours can give a share price an initial boost, which is then extended when the news is confirmed. But there’s far too much randomness in short-term price movements for me to even think of that. And the fall-back in the Harbour Energy share price suggests there’s very little rumour effect anyway.

Combined assets and debts

Should anything actually come of it, I’ll make my decision then. We might be looking at a combined company with attractive combined assets, and significantly diluted debt. But what share each set of investors might get in the merger is a big unknown. So whether it’s worth buying Harbour shares in advance is something I can’t even guess at. I shall wait and see.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Alan Oscroft has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

British union jack flag and Parliament house at city of Westminster in the background
Investing Articles

Labour winning the general election would be positive for UK stocks, says JP Morgan

One mega-bank thinks certain UK stocks could benefit following the 4 July election. This writer considers a FTSE share that…

Read more »

Older couple walking in park
Investing Articles

No savings at 40? Here’s how I’d aim to retire comfortably with FTSE 100 stocks

It's never too late to begin investing in FTSE 100 stocks for retirement. Royston Wild reveals three steps to help…

Read more »

Young Asian man drinking coffee at home and looking at his phone
Investing Articles

Down 17%, is National Grid’s share price a FTSE 100 bargain?

National Grid's share price has taken a battering following a multi-billion-pound rights issue and dividend rebasement. Is it now too…

Read more »

Environmental technology concept
Investing Articles

Up 150% this year! Can NVIDIA stock keep on soaring?

Christopher Ruane explains why NVIDIA stock has soared over 150% already this year, where it might be going -- and…

Read more »

Investing Articles

Down 44% in a year, here’s why the Aston Martin share price could keep struggling

Not only has the Aston Martin share price collapsed in recent years, our writer sees its current business performance as…

Read more »

Investing Articles

I’m considering these 2 high-growth stocks to buy as a technology investor

Our author thinks Kainos and Softcat could be two of Britain's best tech investments. He thinks the risks in the…

Read more »

Abstract 3d arrows with rocket
Investing Articles

A once-in-a-decade opportunity to buy these FTSE 100 growth shares before they rocket?

Our writer highlights two FTSE 100 growth stocks he thinks could seriously outperform as interest rates are cut and economic…

Read more »

Portrait of elderly man wearing white denim shirt and glasses looking up with hand on chin. Thoughtful senior entrepreneur, studio shot against grey background.
Investing For Beginners

Down 14% in a month, is this the FTSE 100’s biggest bargain right now?

Jon Smith mulls over whether he should buy one of the worst-performing FTSE 100 stocks based on it being an…

Read more »