Australian CSM players continue to consolidate

Rick Wilkinson
OGJ Correspondent

MELBOURNE, Dec. 29 -- Two takeover announcements on the eve of the Christmas break will further reduce the number of Australia's coal seam methane (CSM) players in 2009.

Brisbane-based Arrow Energy Ltd. made a friendly cash and share takeover offer for fellow Brisbane company Pure Energy Resources Ltd., which values Pure at $673 million (Aus.).

This was followed by Sydney company AGL Energy Ltd.'s $171 million all-cash takeover bid for Sydney Gas Ltd.

Arrow's offer is made up of $2.70/share in cash plus 1.21 Arrow shares for each Pure share and represents an 81% premium on Pure's last traded price of $2.98 on Dec. 19.

Arrow began the move already holding 19.9% interest in Pure, setting the net acquisition cost at $551 million. Arrow says it will fund the cash component of its offer through a combination of existing cash reserves and proceeds from an earlier deal to sell 30% of its upstream coal seam methane interests to Shell.

Pure's independent directors have unanimously recommended the offer to the company's shareholders, if no superior bid is forthcoming.

The acquisition will provide Arrow with control of additional acreage and reserves in the prospective Walloon Coal Measures in the Surat basin of southeast Queensland, adjacent to its proposed Surat-Gladstone pipeline, as well as further acreage in the Bowen basin further north adjacent to its proposed Moranbah-Gladstone pipeline.

If successful, the acquisition will bring Arrow's total uncontracted 2P CSM reserves to 2 tcf, which is sufficient to underpin two 1.5-million-tonne/year LNG trains planned for Gladstone.

Arrow's offer will open Feb. 11, 2009, and close Mar. 11.

AGL Energy's move on Sydney Gas also appears to be friendly in that Sydney Gas directors have unanimously agreed to recommend the offer and will accept shares in the absence of a superior offer.

AGL's offer values Sydney gas at $0.425 (Aus.)/share and represents a 55% premium on Sydney's Dec. 22 closing price. AGL will fund the acquisition with cash reserves.

The offer follows AGL's purchase earlier this month of the prospective permit PEL 285, in the Gloucester basin of northern New South Wales, from fellow CSM players Molopo Australia and AJ Lucas for $370 million.

The Sydney Gas deal will bring AGL full control of the producing and prospective CSM acreage in the Camden and Hunter Valley regions of the Sydney basin in New South Wales.

With AGL's capacity to meet funding requirements, it believes it is best placed to develop the Sydney basin resources.

AGL's offer will open Jan. 12 and close Feb. 13.

This recent takeover activity comes hard of the heels of the British BG Group's successful takeover of Queensland Gas Co., which also gathered in Sunshine Gas Co. and Roma Petroleum—all CSM players in Queensland.

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