I am writing to you to inform you of a potential corporate opportunity with an Australian listed company (Antares Energy Limited, AZZ.AX) with assets in the Permian Basin.
Antares Energy Limited The following table summarises the AZZ’s financial position.
Column 1
Column 2
Column 3
0
Antares Energy Limited Company Profile
1
Cash
$1M AUD
as at 31 Dec 15
2
Convertible Notes1
$48M AUD
3
Net Debt
$47M AUD
4
Shares Outstanding
240,000,000
5
Last Traded Price
$0.50
In Suspension
6
4 day VWAP2
$0.37
7
Market Cap (VWAP)
$89M AUD
8
Enterprise Value (based on VWAP)
$136M AUD
9
Enterprise Value (based on AUD/US $0.70)
$95M US
1 23,750,000 notes with an issue price of $2.00 AUD, convertible at a rate of 1:3. Interest paid 10% quarterly in arrears. Expiry date is 30 October 2023. (It is noted that 11,891,535 Notes for a redemption value of $24M AUD will be redeemed by AZZ on 31 March 2016).
2 Volume Weighted Average Price between 7 Sept 15 and 10 Sept 15 (on which it was suspended from trading on the ASX)
07 September 2015: AZZ announced an executed purchase and sale agreement for the sale of its Northern Star asset for $150M US and Big Star $100M on with completion scheduled to occur on 30 November 2015 (‘Transaction’)
10 September 2015: AZZ refused to disclose the name of purchaser to the ASX and was subsequently suspended from trading.
1 December 2015: AZZ advised that the Transaction had not occurred as contracted.
Assets AZZ has the following assets in the Permian Basin
Column 1
Column 2
Column 3
0
Asset
Net Acres
1P Reserves3
(MMBOE)
1
Northern Star
13,000
2
Big Star
8,000
3
Total
21,000
6.7
4
Enterprise Value per Acre
$4,500 US
5
Enterprise Value per Reserve
$14 US per boe
1 Proved Developed Producing Reserves as at 31 December 2014
Northern Star: 50 + long horizontal locations with multiple zone potential (Spraberry and Wolfcamp benches) (Diamondback, Elk River and RSP)
Debt Facility: AZZ has negotiated a 5 year Term Debt Facility with in the amount of $200M US at a rate of LIBOR + 4%. The availability of the Facility and the terms are subject to Macquarie’s absolute discretion. It is noted that as at 31 December 2015 this facility remain undrawn.
Potential Opportunities I believe AZZ shareholders would be open to the following potential opportunities:
Purchase of the assets (Northern Star and Big Star) – however, it is noted that the consideration to shareholders would be reduced by the tax on sale.
Takeover of AZZ – presumably a better outcome to shareholders and the purchaser, as tax on sale is avoided.
Merger – reduces the funding requirements of the proposed transaction to the repayment of convertible notes ($24M AUD) as at 31 March 2016.
As a shareholder of AZZ (and given the current cash position and funding requirement of $24M AUD from the redeemed convertible notes on 31 March 2016), I urge you to explore these opportunities further.
Based on the 4 day VWAP prior to suspension AZZ’s assets were trading at an enterprise value to acreage of US $4,500, and enterprise value to 1P proved developed producing reserves of US$14 per boe which indicate upside to a potential acquirer, relative to value of recent transactions in the Permian Basin.
Disclosure
The information is based on publicly released information provided by Antares Energy Limited and no due diligence, verification or audit of the information provided has been undertaken. I make no representation or warranty (express or implied) as to the accuracy, reliability or completeness of the information. I shall have no liability (including liability to any person by reason of negligence or negligent misstatement) for any statements, opinions, information or matters (express or implied) arising out of, contained or derived from, or for any omissions from this Document.
The information contained is commercially sensitive and confidential. It may not be disclosed, reproduced, stored, transmitted, or otherwise used by the recipient without my prior written consent.
AZZ Price at posting:
50.0¢ Sentiment: None Disclosure: Held
