my post from yesterday

I tried to post this in reply to the managment thread but failed yesterday...some might find it worthwhile....I am not sure many of us know the exact legal implications of the SOA and how it impinges on the more widely known takeover laws...

Hi Dodds and Jojo

On the face of it you are absolutely right and I note the unusual venom in the criticism by 618 in his recent post. There are certainly elements of this situation that are very unsatisfactory, especially the fact that alternative bids are being hampered by the structure. I can only hope that the advisors have worked out that by putting the scheme out in the open with a long lead time to consumation, it provides competitors with the opportunity to make a reasonable counter-bid. Main trouble is, they get no help from Hardman. That is a major blunder IMHO.

The view that I put yesterday was, that based on a UBS report that said “no material Chinguetti well intervention work was likely before second half 2007”, the extreme weakness in the share price was going to continue unless there was material exploration success. In addition, Potter has said (whether you believe him or not is another issue), that the Uganda assets are unlikely to be in production for a number of years.

So where would that leave shareholders? Weak cash flow for over 12 months plus uncertainty of the outcome of the remedial work….probable need to raise more equity to fund development/exploration commitments...or sell assets (which could be a good idea). Or, solicit a bid from someone. Who? Timing?

Despite the fact that these assets are going to be worth heaps more in a few years, access to capital was going to be HDR's problem after the Chinguetti debacle. Personally, I would rather monetise my investment and look for greener pastures than wait for ages/years to realise the gains.

My biggest gripe is with the way it has been structured, but you don't know how hard it was to get the bid on the table. I hold out hope for a higher bid and think it may be premature to sell. It should be remembered that the scheme of arrangement needs 75% support from shareholders to succeed. The main risk now emerging IMHO is that the bid fails and those that held out are locked into a position where there is no counter-bid and TLW has control…. To answer some of my questions on this issue, I have called the HDR shareholder “help” line. However, they could not answer the following questions and I am waiting on a response (possibly 48 hours):

1. Is Tullow allowed to buy on market now? It is actually not clear whether of not it can…obviously I expect they can, and are.
2. Is TLW limited to a $2.02 buy price on market? I assume they are, but I want confirmation.
3. When it goes to the meeting vote for the SOA, can TLW vote its market acquired holding?
4. If TLW is buying on market, are they limited to 19.9% unless they make a formal bid?
5. If they are not limited to 19.9% under the legislation, could TLW acquire a controlling stake of say, 30+% without making a formal bid other than the SOA?

The final question needs to be answered because if the SOA is unsuccessful but TLW has control, then remaining shareholders would be locked in to the situation and TLW would have gained control of the assets etc. Similar to the Straits Resources partial bid for Tritton Resources which later led to them getting the rest for peanuts.

Depending on the response to these questions it could be quite risky to stay in the HDR shareholding up until the SOA meeting in the hope of another bidder emerging. That circumstance would arise if TLW gets its 19.9% maximum, then withdraws its bids, then the SOA is subsequently defeated by 25% of shareholders. While that might be unlikely if the SP is under pressure, it could happen. It might be better to take the cash available now.

My ponderings….

Regards
DF