http://www.thecouriermail.news.com.au/common/story_page/0,5936,18...

http://www.thecouriermail.news.com.au/common/story_page/0,5936,18218660%255E3122,00.html

Upgrade heats up gas battle

Richard Owen
21feb06

THE takeover battle for Sydney Gas intensified yesterday when Queensland Gas Company lobbed in a value-boosting 26 per cent reserve upgrade while its quarry called in high-profile corporate pointman Ray Schoer to reinforce the board.

Mr Schoer is a former executive director of ASIC forerunner the National Companies and Securities Commission, chairs Rabinov Diversified Property Trust and gold and base metals explorer Zelos Resources, and sits on the boards of several other companies including Australia Pacific Exchange.
Sydney Gas chairman Michael Norster also used a statement welcoming Mr Schoer's appointment to describe QGC's "highly conditional" and "unsolicited" offer as "opportunistic" and both financially and materially "deficient".

QGC shares jumped more than 3 per cent yesterday to close 2.5¢ up at 83¢ in response to an increase in proved and probable reserves (2P) from 336.3 to 422.7 petajoules.

"Today's announcement substantially increases the gas reserve asset base of the proposed merged QGC/SGL entity, over and above that listed in the bidders statement," QGC managing director Richard Cottee said.

Sydney Gas shares gained a cent and ended the day at 37.5¢.

But after a month of boardroom cogitation the Sydney Gas board accused QGC of using "self-serving, short-term share trading data" to calculate the inadequate premium inherent in its 1-for-2 all scrip offer.

"QGC has acknowledged that access to the prospective NSW market is very important to its growth objectives, especially in the context of the high level of competition it experiences in the Queensland market," the board said.

"SGL is already in production and delivering gas to the NSW market, and QGC does not sufficiently account for this strategic advantage."

The directors also asserted that QGC had not provided "adequate supporting evidence" to enable SGL shareholders to "properly assess its claims about future financial performance and stability – a "deficiency" QGC had been asked to rectify.

"The company is strategically well positioned in the NSW energy market at a time of heightened investor interest in the energy sector and in the coal seam methane sector in particular," Mr Norster said.

"The board's deliberations on the company's options and evaluation of the QGC offer are being undertaken in the context of this strong strategic position."

QGC fired back by arguing that its offer was "about performance" – or lack of it, in Sydney Gas's case – and tapping the company's unrealised potential.

Significantly, Origin Energy's recent acquisition of Pangaea Oil & Gas's 41 per cent joint venture interests in QGC's Argyle and Lauren coal seam gas projects for $90 million has been cast in a new light after yesterday's reserve upgrade.

Analysts estimate that QGC should be worth between 96¢ and $1.05 a share, or as much as $390 million, after factoring in an appropriate premium for control and backing out capital expenditure commitments of $35 million.

The QGC 1-for-2 offer implies that Sydney Gas shares would then climb to about 50¢– some 35 per cent above their present price.

http://www.thecouriermail.news.com.au/common/story_page/0,5936,18218660%255E3122,00.html

T10 :))