valuation of the deal?, page-18

Gutfeeling,

"If there is really other interest in the other option by another group then the only recourse at this point is to buy NXS outright and not proceed with the current transaction ( as it is non binding although I'm not sure it is unconditional)"

From the announcement:

"Nexus Energy Limited (Nexus) today advises that it has signed a non-binding Heads of Agreement (HOA) with Shell Development (Australia) Pty Ltd (Shell) and Osaka Gas Crux Pty Ltd (Osaka Gas) to exclusively pursue a Shell-led integrated gas and liquids development to commercialise the Crux asset."

and:

"The agreement, once finalised and subject to a number of conditions (including relevant regulatory approvals), will result in a new Joint Venture being formed to consolidate the existing gas interests held by Shell with the liquids interests held by Nexus and Osaka Gas. An amendment of the terms of the licence consistent with the integrated project will also be required. Once binding agreements are signed, targeted for April 2012,"


If there really is interest in the other option then they have been given both a deadline and target for coming up with a better deal. They do not need to takeover Nexus to achieve this. It is interesting that the April 2012 deadline for this deal also corresponds with about the deadline for the FID for the liquid project. From this deal we can also say that a propective partner in the liquids project needs to come up with a proposal that values the current project at the equivalent Shell's option of "2% of its participating interest in the new Joint Venture to Shell for A$75 million" for NXS 17% interest.

That is 2% of gas and liquids valued at US$75M

=> 17% of gas and liquids valued at US$637.5M;

=> 20% of gas and liquids valued at US$750M;

=> 100% of liquids valued at US$750M;

=> 35% of liquids valued at US$263M;

Therefore, for the liquid project to still get up and running, it appears the Chineese company needs to offer in excess of US$263M for buying a 35% stake in the project from Nexus before April 2012!

Regards

SP