Awe, Arc Enter Trading Halt As Bid Is Put To Bed

The Age

Friday April 25, 2008

Barry FitzGerald, resources editor

AUSTRALIAN Worldwide Exploration was last night putting the finishing touches to an agreed $510 million takeover bid for Perth-based oil and gas group Arc Energy.

The scrip and cash offer was expected to be pitched at $1.59 a share. That compares with Arc's last sale price of $1.54 a share and the $1.25 a share it commanded before news of the proposed bid leaked out in mid-April.

Both AWE and Arc shares went into a trading halt before the formal announcement of the bid, which was expected late last night.

The bid is the first of many expected in the oil and gas sector as bumper oil prices have boosted cash coffers, making acquisitions a sure-fire way to achieve growth.

AWE operates the Tui oilfield in New Zealand. The field's successful development is expected to increase AWE's cash holding to $300 million by the end of June. While the group plans to continue to spend heavily on exploration, it has said previously that merger and acquisition opportunities are being studied.

The group also has oil and gas interests in the Perth, Otway and Bass basins. Its market capitalisation is about $1.7 billion. Apart from the Arc bid, the market is also waiting on an expected upgrade of the reserves at Tui.

Arc tried to buy Anzon for $690 million last year but was outbid by Nexus, although Nexus recently suggested it might have to reconsider its offer terms in light of the disappointing performance of Anzon's Basker oil project in Bass Strait.

Arc was holding $131 million in cash in January, against which there was debt of $83 million. Sales revenue in the December quarter was a record $54.2 million. As part of the financing package for the acquisition of the Wandoo oil project, Arc holds a hedge contract that originally covered 1.27 million barrels of oil over a five-year term and at a price of $US68.15 a barrel.

Oil production from its Perth Basin interests - including some shared with AWE and others - was 1.15 million barrels in 2006-07. Gas sales for the year were 7357 terajoules.

© 2008 The Age

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