Lockyer Deep - From the horse's mouth OR What the JV partner really thinks about Lockyer Gas, page-283

Hi Eyeofthetiger,I cannot help feel that you are not that familiar with petroleum exploration industry Joint Operating Agreements and application of default, regardless of what the JOA says, based on your initial post advising that a NWE default results in loss of all NWE equity in the ongoing JV.Legal precedent has been established in the petroleum upstream industry JOA's that you cannot default to zero a JV partner that has contributed significant dollars to the JV projects and then cannot meet their share of a future cash call. The sudden death default to zero does happen in the mineral exploration industry in the cases of early exploration where significant funds have not been spent. Modern practice in mineral JOA's is that defaulting parties have their equity in the JV diluted proportionally by the default amount compared to what they have already contributed to the JV.Your first post on NWE default resulting in zero equity was I would surmise an attempt to "scare the sheep", but I see with this most recent post that the future paths for the JV if the Minres takeover 'fails' in the current instance are more pragmatic.I see that with ongoing project activity and which both JV parties support, the NWE directors will have to be prudent and make a rights issue to all shareholders to raise funds to drill wells three and four and ongoing work as the NWE board cannot commit to future expenditure the company cannot fund. Very naughty to do this and the ASX and ASIC frown on this with time in the stone college a possibility.This situation of reduction of funds for drilling wells three and four has arisen as other posters have opined due to the NWE takeover advice fee of up to$11 million reducing significantly funds on hand so that the costs of the first two wells and 3D seismic can likely only be met.Getting back to the most likely rights issue, Minres would obviously take up in full their rights to the NWE issue and out of the graciousness of their heart would underwrite the issue as a show of faith in the robustness of the Project. As underwriter to the NWE issue, any shortfall, if any, would then be taken up by Minres increasing their equity in NWE.Of course, the amount of shortfall of the issue would depend on the issue price. Too low below market price and the 'holdout shareholders' will take up their rights. Set the price higher than market, obviously on the basis that the market does not appreciate the real value of the project, then that could result in some shortfall that Minres would then pick up.The optional course of action set out in your first post of Minres not taking up all their rights is not logical as the aim is for Minres to increase their shareholding in NWE to reach 90% and compulsory acquisition as Gina has just achieved with Warrego.The Minres aim is not to decrease the Minres shareholding in NWE but increase it. I imagine that Mr Ellison would not take too kindly to such a course of action given all the treasure spent in convincing NWE shareholders to accept the current takeover offer! As a holder of Minres in my share portfolio, I would be selling my Minres shares if this, in my eyes "sub-optimal', course of action was taken!!!! So getting back to reality, after the NWE issue has been completed, then Minres can make another takeover offer to the 'holdout shareholders' or increase its interest in NWE under the 3% 'creep' rule.Minres and NWE wish to accelerate drilling and development to increase the value of the project with the publicly stated aim by Minres of having the proposed ~250 million cubic feet per day giant gas plant producing gas and beaucoup revenue asap, so I cant see NWE using the blocking 65% vote rule at all. I do see that eventually Minres will acquire 90% of NWE and be able to go to compulsory acquisition. . One can only speculate as to the time frame in which this might occur.The 'hold out shareholders' may reap a higher price for their NWE shares on the way. This is of course not guaranteed, but hope springs eternal. This is not financial advice and DYOR.GLTAH