santos extends offer

Santos extends its offer time for Queensland Gas
Nigel Wilson, Energy writer
January 24, 2007

THE possibility of Santos amending its highly contested $606 million bid for Queensland Gas Co has emerged, after the company again extended the time for its bid for the coal seam methane producer.
Santos yesterday sent a letter to QGC shareholders saying its new date for acceptances was February 7, but gave no reasons for changing the date from January 31.
The competition watchdog, the Australian Competition and Consumer Commission, has set January 31 as its deadline for giving its determination on the bid and some analysts suggest this may be a reason for Santos extending its offer.

Santos managing director John Ellice-Flint has indicated previously that he is keen to pick up more CSM assets, while the company has also made it clear that its $1.26 a share offer is a fair price.

Analysts said that while QGC had announced early in December that AGL would pay up to $292 million or $1.44 a share for 27.5 per cent of the company, this had yet to be put to QGC's shareholders.

Under this deal, which is backed by the QGC board, the company has also sold 540 petajoules of its gas reserves to AGL over 20 years, beginning in 2008. As part of this deal, it is also contracting to pay AGL $22.5 million over three years to secure transmission pipeline access to allow QGC to deliver gas to third-party customers.

QGC managing director Richard Cottee has said that, although the AGL deal will provide up to $150 million for QGC to develop its gas fields, the company will still need to borrow around $200 million.

The QGC board is preparing an explanatory memorandum on the AGL deal and this is expected to be sent out to shareholders soon.

The ACCC is also understood to be looking at the AGL proposal as part of its consideration of a number of issues affecting the energy sector, including whether markets are constrained by state boundaries.

But analysts are reluctant to suggest that Santos would top AGL's price with cash, suggesting a more complicated offer is being worked on.

Yesterday, QGC shares closed at $1.34 while Santos was 1c down at $9.45.