Rick Wilkinson
OGJ Correspondent
AWE Ltd., Sydney, has rejected an unsolicited $421-million (Aus.) takeover proposal from global private equity group Lone Star Fund. AWE directors labelled the 80¢ (Aus.)/share bid "opportunistic," adding that it was "indicative, conditional, and nonbinding."
The board said the approach does not reflect the fair underlying asset value of AWE. The bid comes just days after AWE's new CEO David Biggs joined the company having replaced former CEO Bruce Clement.
Biggs says his focus is on maximizing value from the company's existing portfolio, particularly through the expansion of the Waitsia gas development onshore North Perth basin in Western Australia.
Last week AWE signed an agreement to sell its 42.5% interest in the undeveloped Lengo gas project in the Bulu production-sharing contract offshore east Java, Indonesia, to Singapore incorporated upstream oil and gas company HyOil Pte. Ltd. for up to $26.5 million (Aus.).
Biggs said at the time that the sale was in line with the company's strategy of divesting noncore assets so that it can recycle capital into high-value growth projects, including Waitsia.
The Lengo cash transaction has an effective date of Apr. 1 and has been structured in two tranches. The first is a $15-million (Aus.) up-front payment following receipt of Indonesian government approval for the transfer of ownership.
This will be followed by an additional two-part cash payment following execution of a gas sales agreement for Lengo. It comprises $5 million (Aus.) if the contract gas price is at, or exceeds, $5.50 (US)/MMbtu and a further $7.5 million (Aus.) if the contract gas price is at, or exceeds $7.65 (US)/MMbtu. The Lengo sale follows completion of the sale of AWE's interest in the Sugarloaf project in the US.
AWE has not quit Indonesia altogether. It will continue its Ande Ande Lumut oil project and plans an appraisal well in the next 2 months. This has potential to add 30-40 million bbl of oil to the project's current estimate of 101 million bbl recoverable.
In Western Australia AWE has begun construction of Stage 1A of the Waitsia project, an $18-million (Aus.) development that will supply gas to the Western Australian domestic market starting in this year's third quarter. Planning is under way for development of the next phases at Waitsia to deliver 100 terajoules/day of gas.