I'd have to say I would really not want that to happen.
I hope that MPO takes the whole lot from Anglo and Mitsui.
The four main projects MPO has are all very good in my opinion (that's a massive understatement... but you all know that). In the past they had too many fingers in too many pies. But now they appear to be preparing and cooking each pie perfectly, and there is a clear path to how each project will be commercialised. MPO is operator of all projects except for QLD, and we know that MPO will want to be operator of its QLD assets. To do that it will need to execute its pre-emptive rights.
It is pretty clear to everyone including blind freddie that MPO have been playing very hard ball with Anglo in their sale process. MPO has successfully ensured that the price that Anglo has accepted is bargain basement prices. It could be a lot higher than it is. Funny how that reserves report due at the end of 2009 is being pushed out a little longer isn't it. Also MPO announcing they will build a power station for gas from their sublease, and the issue that MPO has drilled sole risk wells (this means that MPO effectively owns 100% of the area until a certain level of payback for the well has been received), and that it appears without MPO's drilling expertise, it will be hard to get commercial flow rates.
As for teaming up with WCL.... its a possibility. But I wouldn't want MPO to become a company with projects purely offsure. We already have no real value attributed to the Canadian or South African Assets. If we were to sell out the QLD assets we will lose all exposure to CSG. And also I believe the diversification in MPO's projects is a very good thing... if one does not meet expectations, there are several other baskets with eggs in them.
If there is a team up, I would say it would be a 50/50 JV, or possibly a MPO takeover of WCL. But a takeover will only happen once MPO is producing significant commercial gas flows from the QLD assets.
There is one massive issue that WCL has and that is how on earth is it going to pay the $55-$80m to buy the stakes when it has a market cap of $49m?????
And if it were to buy MPO's stake, as a MPO shareholder I would not want to see anything less than $250m.... or I would be seriously considering an EGM to change the management.
WCL is already looking at a 100% min capital raising... and if it took the lot it would be looking at a capital raising of at least 4 to 5 times its current market cap, which would have to be at a substantial discount to the current price to get people to feel they are getting value and thus support the raising, and the existing WCL shareholders will get diluted to the max.
Just my 2 cents. You are spot on about the economies of scale etc.... it makes sense to have it all in one. I just hope it is all in MPO's name.
It is going to be very interesting to see how it plays out.
MPO Price at posting:
$1.11 Sentiment: Buy Disclosure: Held
