Oil explorer Gulfsands rejects bid approach

LONDON (Reuters) - Gulfsands Petroleum (GPX.L) has rejected a takeover approach of around 350 pence per share from an Indian company, ahead of a possible upgrade to its oil reserves which could boost the company's valuation.

The Syrian-focused oil explorer on Friday rejected the approach as too low although the advance sent Gulfsands' shares up 22 percent on Thursday and by as much as 2 percent on Friday to an all-time high of 319 pence.

"The board is unanimously of the view that the proposal is wholly inadequate and materially undervalues the company," Gulfsands said in a statement.

The approach was at 350 pence per share, according to a source familiar with the situation, and would value the company at around 424 million pounds ($644.4 million).

Analysts at Collins Stewart said they expected the company to upgrade its reserves estimates in the next two weeks which would likely improve the company's valuation, but Fox-Davies Capital cautioned that an offer of more than 400 pence per share could be out of reach.

"Our valuation of the company is about 300 pence, which even allowing for a control premium would result in a possible offer just below 400 pence," Fox-Davies Capital said in a note.

RBS analyst Phil Corbett said he has a 345 pence target price for Gulfsands, with possible further upside in the long term.

"It's not that difficult to see these shares at 400 pence but that is probably the blue sky case," said Corbett.

Collins Stewart raised its target price to 350 pence per share from 300 on Friday after carrying out a risked assessment of the upside to block 26 in northeast Syria.

"In our view the perceived value of Gulfsands will depend closely on its latest assessment of its reserves in Syria's block 26," said the broker in a note.

Last year, Gulfsands said the block had proved and probable reserves of 40 million barrels of oil equivalent (mboe) with proved, probable and possible reserves of 64 mboe.

Gulfsands is the operator and part-owner of block 26, half of which is held by China's state-run Sinochem (600500.SS).

A source familiar with the situation told Reuters on Friday the bid was from an Indian company, but that the bidder was not Oil and Natural Gas Corp (ONGC) (ONGC.BO), India's state-run explorer, as some analysts had speculated.

Indian Oil Corp (IOC.BO) and Essar Oil (ESRO.BO) have actively sought acquisitions overseas in the past, while another Indian company, Reliance Energy, also has international interests.

Shares in Gulfsands were up 0.16 percent to 312.6 pence by 1508 GMT.

(Reporting by Sarah Young; Editing by Sharon Lindores)

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