Cottee calls for calm
CENTRAL Petroleum managing director Richard Cottee is trying to turn on the charm to win over his shareholders in a 20c per share takeover offer from Macquarie Group, as shareholders become increasingly convinced the company is being sold for a song.
Haydn Black
27 April 2017 09:49 News
Last month Central's board unanimously recommended the Scheme of Arrangement proposed by Macquarie, and aside from yesterday's announcement about an almost two petajoules gas contract it has been ominously silent.
Cottee wrote to shareholders yesterday saying it was constrained in its ability to communicate on the scheme, and in that vacuum there had been "commentary on the merits or otherwise of the SOA, not all of it well-informed".
While the company is preparing a scheme booklet containing the arguments for and against the all-cash offer, Cottee pleaded with people to wait until they see the booklet and the independent expert's report from RISC before judging the merits of the offer.
"Shortly after the despatch of the scheme booklet, I intend to hold shareholder information sessions in Brisbane, Sydney, Melbourne and Perth to enable shareholders to air their views and ask any questions they may need to allay any concerns they have about the SOA," Cottee said.
Provided court approval is obtained this Friday, the despatch of the scheme booklet will occur next week.
The pulse of shareholders, who are rallying under the banner of the Central Petroleum Shareholders Association flag, which was set up by the Western Australian branch of the William Buck Group, and Robin Judd.
It has started by surveying its members, and it says the overwhelming majority do not believe the 20cps takeover offer by Macquarie represents fair value for the company or Central's potential, nor that the contingent right being offered by Macquarie has no real value.
The note has no drilling obligations and hinges on exploration success at the Ooraminna gas field, the Palm Valley Deep prospect drilling, appraisal of the Mt Kitty-1 gas-helium discovery and certain exploration licences in the Santos Southern Amadeus Basin joint venture in the four years following completion of the scheme.
The CPSA has historically worked closely with the current board and CEO Richard Cottee over the past five years, but says it is independent of the board and Macquarie, and its merely working to shareholder value through providing a platform to act as a group.
The group said it had been advised a small group of shareholders are potentially looking to propose an alternative to the scheme of arrangement, spokesperson Robin Judd said recently.
Among ideas being kicked around by shareholders are that the recently announced gas sales agreement with the Pine Creek power station could generate around $20 million in profits per annum if Central can sell its gas for a profit of $5 per gigajoule.
Central has discussed neither the potential profit nor commented on the speculation.
Yet on share-trading forums similar figures are being used to support shareholder's contention that the offer is too low for the potential of Central to become a major Central Australian gas supplier, with some large untested gas-helium leads and a number of undeveloped gas discoveries at Ooraminna and Orange that could be ideal sources of gas for the Northern Gas Pipeline.
The Macquarie deal will give it control of Central for $86 million, small change to the multi-national bank, and upside to 600 billion cubic feet of gas from near-term exploration opportunities.
It already owns a 50% stake in some Amadeus Basin production assets and was a backer of Central's purchase of the Mereenie and Palm Valley assets, but given Central's funding issues appears to be trying to replicate its major role in the US gas business with the takeover.
Central desperately needs both cash and contracts to continue its development.
It's understood Cottee sounded out the markets for another capital raising last year, but found little support.
Macquarie has indicated it would be keen for him to continue with the business following the takeover.
If the offer fails, Central would probably need to raise an amount similar to its market capitalisation, around $90 million, and its future would essentially be wedded to the development of Jemena's Northern Gas Pipeline.
For the takeover to succeed it will need at least 75% of shares voted at the meeting to back it, which given Central's fractured base of small holders, who are already talking about share splitting - something Macquarie specifically prepared for in its offer, with a clause covering any such "improper conduct".
If it fails, Central will need to raise emergency capital to appraise and develop sufficient wells required to support any gas contracts in the east coast market that the company negotiates.
Central shares have been suck at 20cps since March 10, when the revised takeover offer was announced.
Expand
