American Patriot Oil and Gas Ltd. has urged shareholders to reject an “opportunistic” offer from a private oil company to purchase its oil and gas assets for US$20 million (A$28.7 million).

Melbourne-based American Patriot emerged from a trading halt on Sept. 29 to announce it had received a letter of intent for the sale of its assets to U.S. oil company, Edward Mike Davis LLC.

American Patriot is currently working to prove up its key Northern Star in Montana in a focused drilling campaign with testing underway. The company also has conventional and unconventional assets in Colorado.

The letter of intent was received from the legal advisors of Edward Mike Davis, and is subject to a number of terms and conditions.

Davis, dubbed ‘Tiger Mike’, has a long and colorful history in the oil and gas business. He owned an independent E&P business in Houston during the oil price boom in the 70s and 80s which later went in to bankruptcy.

Alexis Clark, American Patriot chief executive, said he was pleased at the approach from a significant private U.S. oil company but believed the offer was inadequate.

“The offer demonstrates the quality of American Patriot’s portfolio of assets and validates the company strategy, particularly in the current challenging market environment,” he said.

“However, we believe this offer is opportunistic in the current oil price environment and substantially undervalues the potential value of American Patriot’s assets."

“Accordingly, the board believes that is in the best interests of shareholders of American Patriot to focus on the performance of the assets to realize the significant value and to continue discussions with potential bidders to extract a higher offer price for the assets.”

Clark said the company’s business model remained robust, even during volatile oil markets.

Looking forward, American Patriot will continue to grow the business by seeking out quality, low cost, early entry acreage plays.

“We will also look to maximize value and protect shareholder funds by entering into joint ventures with high quality U.S. operators who pay for the drilling costs on our projects,” he said.

American Patriot’s strategy is to lease acreage at low cost, prove it as a resource project, sell it for more than the entry price and repeat the model with U.S. operators as joint venture (JV) partners.

Clark assured that its JV partners were aligned with the strategy.

American Patriot had $1.5 million cash at the end of the June quarter. Its shares soared 25% to 17.4 cents as of Sept. 29.

Contact the author, Lauren Barrett, at lbarrett@hartenergy.com.