Medco Energi Internasional has reached a £390.6m ($511.3m) agreement to acquire the entire issued and to be issued ordinary share capital of upstream oil and gas firm Ophir Energy.

Medco will fund the acquisition from its existing cash resources and the proceeds of a credit agreement entered with Standard Chartered Bank.

It will be implemented via a court-sanctioned scheme of arrangement under Part 26 of the Companies Act 2006.

Earlier this month, Ophir Energy received a takeover offer from Medco.

Medco director and CEO Roberto Lorato said: “The enhanced scale, diversification and growth opportunities of this acquisition would create benefits for employees, partners and host countries, and further strengthens Medco’s position as a leading independent oil and gas player in South-East Asia.

“The enhanced scale, diversification and growth opportunities of this acquisition would create benefits for employees, partners and host countries.”

“In Medco’s view, the combined business will hold a more balanced regional portfolio of producing and development assets, better able to withstand macroeconomic volatility, and will have meaningful production and cash flows to improve Medco’s credit position and the ongoing development of the portfolio.”

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Medco reserves the right to reduce the consideration payable for each Ophir share under the terms of the acquisition, in the event any dividend, distribution or other return of value in respect of the shares is declared, paid or made on or after the announcement date.

Ophir Energy chairman Bill Schrader said: “The Ophir board believes that the Medco offer reflects the future prospects of Ophir’s high-quality assets, as reflected in the premium of 65.7% to the closing price of 33.20p per Ophir Share on 28 December 2018.”

The acquisition is subject to the approval of the scheme shareholders and the sanction of the court.