valuation of the deal?, page-21

SMH article this morning

Shell's deal on WA venture cheers Nexus
Paddy Manning January 20, 2012


SHELL has put a big foot on the Crux field off Western Australia, in a deal that Nexus Energy says values its stake at $637 million, double its market capitalisation.
The tradeoff is that Crux, in the Browse Basin, will not be developed until next decade, when it will provide backfill gas for Shell's Prelude floating LNG facility, a world first.
Under the deal, Shell, which already owns rights to the Crux gas, will emerge as operator and majority owner with 80 per cent of an integrated Crux oil and gas project, with Nexus' stake reducing from 85 to 17 per cent and minority partner Osaka Gas diluted from 15 to 3 per cent.

No cash will change hands but Nexus will have an option to sell 2 per cent of the project to Shell for $75 million - valuing the entire Crux asset, which has about 400 million barrels of oil equivalent, including 2 trillion cubic feet of gas, at $3.75 billion.
On this basis Nexus, whose shares were suspended at 24¢ on Tuesday pending the announcement, said yesterday Crux was worth $637 million, or 48¢ a share, to the company, which has a market capitalisation of $318 million.
''Investors should be overjoyed,'' Nexus chairman Michael Fowler said. ''The announcement today is a company-changer for Nexus''.
If the deal proceeds, Nexus will abandon altogether its previous plans for a cheaper and quicker liquid-stripping project at Crux, which would have cost about $1.4 billion to develop but would have generated revenues from the sale of condensate from a floating production, storage and offloading (FPSO) unit from 2014. Nexus has spent about $60 million on long-lead items such as compressors and turbines to be used in the liquid-stripping option, but Mr Fowler said these would be sold at market value and not result in wholesale writedowns.
Instead, the Crux partners will develop an integrated project with a different FPSO to handle condensates while dry gas will be piped 160 kilometres to the floating Prelude facility. The Crux joint venture would pay Prelude tolling fees to process the gas, and would gain exposure to the LNG market.
Nexus yesterday estimated the total capital expenditure at $2.5 billion, based on industry averages. Shell would not comment on the project valuations or cost estimates.
Bell Potter analyst Johan Hedstrom said the proposed deal provided a clear path forward for Crux that would be welcomed by the market.
But he said it was not likely that another oil industry buyer could be found for Nexus' stake in Crux at anything like the value - which he estimated at roughly $10 a barrel of oil equivalent - claimed for it.
The parties aim to reach a binding agreement by April. The deal would be conditional on government approvals, including foreign investment approval and conversion of existing rights into a retention lease rather than a production licence.