tipton west sale imminent

Arrow May Bid for Beach Asset After Losing Pure, JPMorgan Says
By Angela Macdonald-Smith

March 25 (Bloomberg) -- Arrow Energy Ltd., the Australian coal-seam gas producer beaten by BG Group Plc in a takeover battle for Pure Energy Resources Ltd., will probably buy an asset from Beach Petroleum Ltd., JPMorgan Chase & Co. said.

Brisbane-based Arrow’s decision to accept BG’s cash offer for its 20 percent stake in Pure increases the likelihood the company will now “move swiftly” to buy Beach’s 40 percent stake in the Tipton West field, which may fetch as much as A$500 million ($349 million), JPMorgan said in a March 24 report.

BG yesterday increased its stake in Pure, also based in Brisbane, to more than 90 percent after Arrow accepted the U.K. company’s offer. The sale netted Arrow a profit of about A$200 million, taking cash reserves to more than A$700 million, the Australian company said. Beach Managing Director Reg Nelson said last month that initial bids for the stake in Tipton West were within a range that should result in a sale.

“Despite having been on the market since September 2008 we anticipate that a sale is imminent,” analysts led by Sydney- based Benjamin Wilson said in the report. “While we believe the Tipton West acreage is inferior to Pure’s Cameron project, we think that as current operator of the project, Arrow can extract definite synergies by consolidating the joint venture.”

The “imminent” sale provides a “clear catalyst” for Adelaide-based Beach, which is trading below valuation, the analysts said.

Beach added as much as 6.3 cents, or 7.1 percent, to 94 cents on the Australian stock exchange and was at 93.5 cents at 10:40 a.m. in Sydney. Arrow, the Australian partner in coal-seam gas of Royal Dutch Shell Plc, gained as much as 3.5 percent to A$2.70.

The acquisition would increase Arrow’s proven, probable and possible reserves by about 30 percent to 4,800 petajoules (4.5 trillion cubic feet), JPMorgan said. Adding reserves is important for Arrow to help underpin a gas supply agreement with Liquefied Natural Gas Ltd. and for possible future developments with Shell, it said.

To contact the reporter on this story: Angela Macdonald-Smith in Sydney at [email protected]

Last Updated: March 24, 2009 20:03 EDT