Article by Helen Clark courtesy of Energy News Bulletin.
STRIKE Energy has folded, accepting Hancock Energy’s competing cash offer for its 26% holding of Warrego Energy and jettisoning its own attempted all paper takeover of its West Erregulla gas field partner.
The two have been competing for control of Warrego and its 50% share of the onshore Perth Basin field since November.
The subsidiary of Hancock Prospecting wants to lock in cheap gas for its mining operations while Strike wanted the kind of reserve increase that can underpin a fertiliser plant, and secure project financing for the ambitious venture.
Hancocks’ series of increased cash offers first saw off Beach Energy’s 20cps share bid last year (subsequently revised up to 25csp then abandoned)
In January fellow miner Mineral Resources took a large stake, then increased it to 19.17%. On Monday Hancock said MinRes had accepted its cash offer, giving Hancock a controlling share of its target and sending its offer of 36cps unconditional.
There had been a 40% acceptance threshold, otherwise the offer remained at 28cps.
Strike today pointed out the milestones it has achieved, including realising $116 million in cash from the deal, and a 40% rise in its share price compared to the beginning of November before it launched the bidding war with its initial 0.775 Strike shares for every Warrego share.
It subsequently revised this up to a one-for-one offer.
This gives the company $183 million cash and undrawn loans after a recent Macquarie loan made at the end of last year. Its market cap is currently $857 million.
Hancock has maintained Strike’s own star rose only in tandem with Warrego thanks to its own competing cash offer and maintained the WE field operator’s deal was inferior in all scenarios.
“Strike’s joint venture partner will be controlled by a credentialed, well-funded and motivated counterparty to pursue development activity in respect of the West Erregulla gas project,” Strike said this morning.
“In the near term, Strike will also look to engage with Hancock, as the controller of the non-operated 50% interest in EP469, in relation to the development strategy for, and how to maximise the value of, EP469, whilst meeting both parties’ operational objectives.”
“Hancock also have significant cash reserves with sufficient existing financial capacity to fund their portion of the West Erregulla development costs.
It says the Hancock offer for Warrego and its reserves and resources base thus implies a valuation for Strike of 80cps, when its other Perth Basin holdings are taken into account.
