Excellent post ian. Yes, a merger in this case seems to be the lesser of two evils. Below is part of a post I wrote on the NEN forum when the Evoworld takeover was initiated.
"There is division amongst shareholders regarding the management of NEN. Yes, they have not done all that well during the past 10 months – I’ll admit that! However ENI should be as much to blame I reckon. They knew what was happening (during the Vietnam drilling process), whether they told NEN things were not going to plan immediately or kept it hidden is anyone’s guess. Did NEN rely too much on this information or were they just over confident?
Were NEN naïve or just caught in the headlights? You will have to make up your own mind on that. Remember ENI discounted the final drilling costs by almost 75% ($US22m down to $US 5.75m), an admission of guilt or are they sitting on something big and wanted NEN out of the way?
Should there have been a capital raising early on? In hindsight probably, but everyone would have complained of share value being diluted.
Should they have sold the Californian assets? Maybe, maybe not – it helped rescue the company.
Oil and Gas exploration is like that, it is littered with failures – always will be. There is no such thing as a sure bet, it is about risk versus reward. The choice is yours, can’t blame everyone else – I don’t.
I agree with what Councilgritter said. This is obviously legal (somehow) and Evoworld are using a mixture of fear, greed and shareholder naivety to secure the company. Look at the IDG posts on HotCopper, those who got left behind and had hoped for a different conclusion are stuck. There are some pretty sad stories in there.
We as shareholders now need to be decisive. For better or worse we voted the board back in at the last AGM. The choice is yours and the company’s future is in your hands. Isn’t that the way it is supposed to be?!!
I also noted that (and you have to believe management on this one, and I know many won’t!) NEN were looking at mergers or reverse takeovers that may see the board go anyway (before you say it, yes they will probably get a payout). If we stay put and management pay wages to themselves the company should last quite a few years, go with Evoworld and it could be quite a few weeks!
Either way I staying with what I know and understand – I’ll take the risk……………….."
NEN were a "one trick pony" in many ways with their Vietnam exploration strategy. Yes they were a bit naïve to think everything would just work out without a plan B or other worthwhile exploration assets. Luckily they did have their Californian assets that were producing enough oil to pay the bills. Without that sale the company would have disappeared completely.
I think NEN's main aim is to get back into exploration as quickly as possible. First they would have to fight off the Evoworld takeover which may be difficult with disgruntled investors after the Vietnam fiasco. It is worth remembering that Evoworld had no plan going forward either which probably means it is just a cash grab.
From what I see MEO have a relatively large portfolio that has become stagnant with not a lot happening although drilling is on the horizon. I am not sure what NEN adds to the equation but the way I see it is that the merged entity with money in the bank, assets and at least potential is better than two single companies hoping for a break. If we merge we can hope together - for the most part that is what oil and gas explorers do!!!!!
MEO Price at posting:
2.1¢ Sentiment: None Disclosure: Not Held
NEN Price at posting:
3.2¢ Sentiment: Hold Disclosure: Held
