explorers' shares soar amid csg takeover specu

http://www.theaustralian.news.com.au/business/story/0,28124,24854131-36418,00.html

Explorers' shares soar amid CSG takeover speculation

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AFTER a slew of coal-seam gas (CSG) deals recently, investors have piled into explorers Eastern Star Gas and Blue Energy, betting that they will be next on the predators' lists.

Eastern Star, based in NSW, shot up 22 per cent, hitting a six-month high of 69c yesterday, while the smaller, Queensland-focused Blue Energy rose 35 per cent to a three-month high of 20c.

AGL Energy and Arrow Energy moved to shore up CSG reserves in friendly deals last week. On Christmas Eve, AGL offered $171 million for Sydney Gas, while Arrow agreed to spend $551 million to take full ownership of Pure Energy two days earlier. The previous week, AGL paid $370 million to AJ Lucas and Molopo for Gloucester Basin exploration ground, in a deal Patersons resources analyst Scott Simpson said implied that Eastern Star was undervalued.

Eastern Star managing director David Casey said he had previously held discussions with suitors, but that nothing had come of them.

"(Eastern Star's share price gain) is largely on speculation and a process of attrition -- we're the last man standing, essentially," Mr Casey said.

"With AGL acquiring Gloucester Basin and Sydney Basin (assets), Eastern Star is the largest independent left in NSW.

"We've been in discussions with different parties at different times, but as far as we're concerned, we don't think that our share price is, or has been, a reflection of the underlying value in our assets."

AGL is a prime candidate for a move on Eastern Star, being cashed up thanks to more than $3 billion of recent asset sales.

It is also on a mission to more than double its proven and probable (2P) reserves to 2000PJ in the medium term.

Eastern Star has about 218 petajoules of net 2P gas reserves, with ambitions to boost those to more than 800 next year.

Eastern Star's rise yesterday brought its market value to $526 million, while Blue Energy's was $87 million.

CSG producers and explorers have been partly spared the slump in broader commodities in the past six months, mostly because of global oil majors' ambitions to produce liquefied natural gas from CSG in the Gladstone region.

Arrow's shares were also boosted yesterday, as were those of its CSG-to-LNG partner, LNG Ltd, after Norwegian LNG shipper Golar said it was in talks to buy LNG produced by the pair at Gladstone and take an equity stake in the plant. Arrow rose 13 per cent to $2.39, while LNG rose 14 per cent to 66c.