shale be right

Shale be right

by: Tim Boreham
From: The Australian
November 12, 2011 12:00AM

WE hereby declare Beach Petroleum's tilt at shale gas chum Adelaide Energy as the most hastily executed takeover in recent memory.
And what a clean execution it was.

On Monday, Beach (BPT, $1.28) lobbed a 20c a share on-market offer for its Cooper Basin junior partner.

Despite the Adelaide board's protestations, by Thursday Beach (which started with a 19.5 per cent stake) had breached the 50.1 per cent threshold and yesterday stood at 55 per cent.

If the valuation ascribed to Adelaide Energy translates to other juniors, now's the time to move. But the investment conundrum is whether to follow BHP's money to the US.

Happily, there are a few juniors with a foot in either camp. Austin Exploration (AKK, 3c) is more known as an active explorer in the southern US but has a 50 per cent working interest in the Cooper Basin's PEL105 block, partnered with Adelaide Energy.

On the safe assumption that most of the value of the $95 million bid relates to Adelaide's Cooper Basin acreage, Hartleys oil guru David Wall ascribes a $10-$15m "look through" value for Austin's share of PEL105. Austin bears a market cap of $16m, ($27m fully diluted). Taking into account US assets such as the Birch Project in Texas, Wall values Austin at $103m, or 11c a share.

Strike Energy (STX, 15c) is partnered with Beach in the Cooper Basin.

Strike has earmarked $5m for two Beach-operated wells in the first quarter of 2012, but yesterday's news focused on Texas's Permian Basin, where it paid $US3.5m for new ground with an estimated 500 million barrels of "original oil in place".

Another Cooper Basin player worth watching is Drillsearch (DLS, 65.5c), if only because it's already a conventional gas producer.

Any of these plays are worth a speculative buy.

http://www.theaustralian.com.au/business/opinion/shale-be-right/story-e6frg9lo-1226193050417