From a risk perspective - and long-term - it makes sense to...

From a risk perspective - and long-term - it makes sense to diversify risk.

However, from a shareholder perspective - given the shannigans of oil plays - it looks like Magnum Hunter are getting their hooks in tight and will squeeze hard for a cheap takeover down the track.

Interesting to note, the 15 million shares issued to AQO added to the 65 million NSE give directly to Magnum Hunter, push it past the 20% threshold. The 65 million alone do not.

The problem for Magnum Hunter is, if they want to gain exposure to shale through NSE (and thereby AQO through 52% farm-in) the deal does not actually produce any near term drilling for either company (AQO and NSE) in shale in OZ. All we have is a leisurely seismic program planned for AQO in 2014. So what was the point from Magnum's perspective? Answer: asset acquisition for the long-term. All they've given up is some developed acreage at top dollar in the US.

I'm starting to think the Magnum Hunter have identified these two companies as having the most undervalued shale assets in OZ (undeveloped that is) and have initiated a squeeze technique to takeover both companies down the track. With NSE, once those shares are issued and debt agreements are in place, it would be very difficult for other major shareholders to block it (i.e. Magnum Hunter will have no qualms about taking over responsibility for its own debt).