takeover!, page-42

Mystery takeover bid lobbed for AWE

BARRY FITZGERALD
The Australian
December 14, 2013 12:00AM

OIL and gas group AWE is to spend the weekend assessing the merits of a non-binding and conditional merger proposal.

The $620 million Sydney-based group with production interests in Australia, New Zealand and the US, and an oil development project in Indonesia, did not provide any further details.

The approach follows a slump in its shares to six-month lows of $1.18. That leaves it well short of most analyst valuations of about $1.75 a share.

Analysts said that there were many Singapore-based groups that could be interested in AWE, mainly for its AAL interest. But they also noted that the share price pressure felt in the last six months by AWE was shared by its peer group of small to mid-tier oil and gas groups on the Australian Securities Exchange.

Companies in its peer group include Senex, Beach, Tap, Drillsearch, Nexus, Roc Oil and Aurora. But there were no matching announcements from them yesterday saying they were looking to merge with AWE.

AWE's share price weakness comes despite the company recently clinching a deal to sell Santos a 50 per cent stake in the Ande Ande Lumut (AAL) oil project in Indonesia for $US188m ($210.4m), leaving AWE with a 50 per cent interest and sporting a $60m profit on its original investment.

Analysts said a bid for AWE could come from anywhere, given its diverse interests. But its key interests -- AAL and a stake in the Sugarloaf shale oil joint venture in Texas -- would suggest interested buyers from those markets. AWE's use of the term "merger" suggested Santos was not involved.

That also goes for AWE's partner in the Bass Gas project offshore Victoria, Origin.

AWE also believes that it is undervalued compared with its peers, indicating any merger proposal would have to be a full offer to win over the company.

AWE recently told its shareholders that it was the cheapest stock in its peer group, with an enterprise value to oil reserves of less than $10 a barrel of oil equivalent.

It also ranked itself as the second best on the remaining life of its reserves, which now exceed 20 years.

AWE had sales of $301m in the year to June. Operating cashflow after tax was $118m. It was holding $41m cash at the time, against which debt was $78m. It also had a $222m in undrawn facilities at its disposal.

All of that was before taking the sale of the half share in AAL to Santos into account

http://www.theaustralian.com.au/business/mining-energy/mystery-takeover-bid-lobbed-for-awe/story-e6frg9df-1226782832011#