when is our next M&D payment. Will rle joint force with icn. I'm...

when is our next M&D payment. Will rle joint  force with icn. I'm  tired.

Real’s chance in M&A frenzyThursday, 12 November 2015


Anthony Barich


THE merger and acquisition activity ramping up around Real Energy bodes well for the Cooper Basin-focused junior, which is well placed even in a poor oil price environment on several fronts, Edison Research says.





As Australia’s upstream oil and gas industry is besieged by the drop in oil prices, Real has successfully raised $6.2 million through a stock offering and received its $5.9 million R&D tax incentive return, while developments around its Queensland acreage keep interest bubbling along.




Real’s focus is on developing unconventional and conventional gas and oil resources in the Cooper- Eromanga Basin in central Australia.




With 2C and 3C resources booked following initial exploration drilling of 276 billion cubic feet and 672Bcf of gas respectively, Real’s next steps are to confirm sustainable commercial production.




Amid all this, the M&A market is starting to unfold, particularly in central Australia, even while – and likely because – oil prices remain weak.




Edison says Real further differentiates itself by being a 100% owner and operator of its four permits covering 9523sq.km in southwestern Queensland; while nearby activity on the Windorah development, operated by a Santos, Beach and Origin consortium, continues to produce results “exceeding pre-drill estimates” with further wells to come.




On the bullish side, Real has an export infrastructure permit, a proven gas play with multiple targets, a gas off-take contract and further value-add work, Edison says.




On the bearish side, overall industry is slowing, softening LNG prices could affect deals in the longer-term and access to cheap debt and equity is still tough in a low oil price environment.




“There appears to be a growing wave of M&A activity in the region as cash-rich players with long-term views of commodities, in particular gas, look to capitalise on asset-rich companies with depressed share prices, that could find it difficult to access capital to develop projects,” Edison said in a note to clients issued overnight.




There was the pursuit of Armour Energy by Westside Corporation – part of the Chinese owned Landbridge Group – whose latest bid was at a 94% premium to the recent share price, and even that fell through as Armour’s shareholders last week overwhelmingly backed the 75% farm-in offer with Aubrey McClendon’s American Energy Partners.




AEP had tabled a $US100 million ($A141.96 million) farm-in.




WestSide operates the Meridian CSG field in the Bowen-Surat Basin.




At the other end of the scale, Santos has been in the sights of Middle Eastern/Asian syndicate Scepter Partners, and has rejected an initial $A7.1 billion bid at $6.88 per share, in what is widely seen as an opening salvo to acquire the company.




Santos more recently roped in Chinese outfit Hony Capital for a 9.9% stake in what some analysts see as an attempt to takeover-proof the oiler.




Then there was Drillsearch, announcing last month its marriage to Beach Energy, two Cooper Basin-focused companies that have so many synchronicities many wonder why it hasn’t happened sooner.




What does all this mean for Real shareholders?




“At the very least it shows that there remains international interest in Australian E&P (exploration and production),” Edison says.




“Real needs to show that stimulation efforts can produce sustainable commercial production, its assets could provide long-term value.”




On top of all this are the east coast gas shortages, which still loom large as an attractive factor in the recent M&A market in the Cooper, particularly regarding Drillsearch and Beach.