Quadrant being prepared for ipo, page-48

My views (for what it's worth),

Oil and gas companies rarely increase their stakes in a given project to over 65% - particularly offshore - to manage risk. On this basis, I think a take over of CVN by Quadrant is unlikely unless it is exploits short term share price weakness with a subsequent sell down once a larger resource is proven and ready for development - at a hefty premium. If Quadrant have money to spend, AWE would be a better fit with exposure to multiple producing fields with lower cost satellite growth options (Trefoil to Yolla infrastructure) and growth potential onshore WA with Waitsia. Onshore drilling costs and risks are substantially lower, although I accept that the liquids content of the Greater Pheonix area is appealing.

Personally, I believe it is more likely that a domestic end user or provider would purchase the asset - not CVN as a company. Someone like Fortesue Mining who's trucks are marked for conversion from diesel to LNG and who have already entered the Oil and Gas space in the Canning Basin would make a strategic acquisition; with the proven expertise of Quadrant, as operator, to deliver the gas onshore to lock in low cost fuel for their life of mine.

I think that any Quadrant listing will have a positive impact on CVN's share price - but only when the brokers get in to the detail of the assets. Quadrants production profile is in decline and Phoenix is a big part of future expansion plans (and hence implied value) - simply a question of where it fits in their growth pipeline in terms of capex and return on equity as to when it actually gets developed.

Other than any detail and interest in a Quadrant listing, expect CVN to fly under the radar - sub-8c highly likely - until Dorado and PS3. There is nothing before this drilling that will drive up the price and this will consume remaining cash reserves with no income / producing assets. The biggest risk for CVN is that Quadrant has lower capex value propositions that delay development post drilling and CVN has no funds to support itself. I'm sure this was a big part of managements decision to cash in any future royalty on the Thai assets.

Do your own research