cooper basin consolidation and targets

FYI, I posted this on SXY threads.
cheers

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I wrote this Sunday night- the next day SXY announced the flow rates of Kingston-1.
So I think these results just reinforce the impetus for a t/o.

I have shares in most of the C/B O&G companies, incl DLS, BPT,SXY and OGY.
My favourite is Senex.

The media, and we on HC, have spoken at length about the inevitability of consolidation of players in C/B.

This consolidation is by way of takeovers, and by way of J/V deals by the big international O&G players.

We have seen the J/V plays with BG j/v-ing with DLS, and recently with Chevron j/v-ing with Beach.

We have already seen t/o of Acer by DLS, and a t/o of Adelaide Energy by Beach.

The media now appear to have picked out Senex as a target probably because Drillsearch and Beach have already struck a deal with a multinational.

Well, we have already discussed here, that the major issue as a precursor to a t/o or a big j/v deal, is that the assets need to be de-risked.

Senex is very rapidly addressing that re-risking of its unconventional wells by underatking fraccing of a large number of wells, with the view to then flow testing. It seems that once the wells prove that they flow, that the game changes - the pilot programs are the next step, and larger funding and expertise is required.

So imho, whilst Senex is certainly an attractive target - the "sitter" for consolidation on the assumption of positive flow results of the current program, is ORCA (OGY)!

Why?
- Senex owns 19.9% of the share capital already
- Senex is J/V partner holding 80% of PEL115 (Kingston and Hornet wells) and 80% of PEL110 (on the Western Margin where they are doing 3D )
- Senex is already Operator of both permits
- Senex has already paid 3.5c p/s BEFORE they even drilled Kingston-1.
- OGY shares are now trading at 2.6c, well below the 3.5c Senex already paid for their 19.9%
- PEL 115 is right in the guts of PEL516 where the other Senex wells are located.
- Pel110 is not just one land parcel - it is spread all around Pel516
- Pel 110 is next to other Senex permits and the permits of the other C/B O&G coys
- Pel 110 should be highly prospective given the results of others nearby, and is under explored (hence 3D)
- OGY is only capiltalised at a bit over $14m
- Senex is capitalised at $855m !!
- Senex has about $150m of cash

So why would Senex want 100% - plenty of good reasonS:
- any development of Senex "basin-centred" unconventional assets must include the Orca/Senex J/V assets ie Pel 110 & Pel 115. It would simply not make any sense to just develop those wells in Pel 516, and leave those plum wells in Pel 110.
- owning 100% of these permits means Senex does not have to deal with a seperate J/V partner.
- owning 100% of permits means that Senex can more easily sell down an interest in the permit.
- if these wells ever start producing cash flow, then Senex has control of all cash.
- Senex will know that the assets is under valued!

IMO a t/o of Orca by Senex is a matter of "When", not "If".