Elixir Petroleum Limited and Gawler Resources Limited announced an agreed proposal to merge their businesses to create a balanced diversified oil and gas exploration and production (E&P) company listed on ASX and AIM and capitalised at approximately $35.0 million (£14.4 million).

The consideration to be paid by Elixir represents an 11.4% premium for Gawler shareholders on the basis of both companies’ 30-day volume weighted average share prices and last trades prior to the current trading halts.

The merged group will combine emerging Gulf of Mexico production with high impact North Sea exploration. It will be well-funded allowing growth of the producing assets to run in parallel with an active and highly prospective exploration program.

The Boards of Elixir and Gawler believe the benefits of the merger are compelling.

• A 30% working interest in the High Island A268 oil and gas development project in the shallow water offshore Texas, which is due to come on stream in September this year, initially producing at gross rates of around 20 million cubic feet of gas per day.

• A portfolio of North Sea exploration licences containing drillable prospects, which, if any one is successful, will provide significant upside to the group’s valuation.

• Access to US deal flow where management has demonstrated the ability to source quality new projects to grow the oil and gas business.

• A board and management team with complementary skills and extensive experience in the technical, commercial and financial aspects of the international upstream oil and gas industry.

• Immediate exposure for shareholders of both Elixir and Gawler to a more diversified portfolio of assets at varying stages of evaluation and development.

• Balance sheet capacity to pursue the group’s expanded business plans, facilitated later in the year by first production cashflow; and

• An effective merger of equals where existing Elixir shareholders will represent 52% of the enlarged company and Gawler shareholders the remaining 48%.