So will a counter offer emerge for Innamincka Petroleum after it agreed to a friendly merger with Drillsearch Energy?
The deal is small beer, around $42 million for the Drillsearch all paper offer revealed yesterday, but there are strategic strengths to the story.
The merged group would end up with a much larger market cap of around $150 million, a bit more production and some interesting exploration plays.
The proposal reflects recent moves for consolidation of junior to mid-cap oil and gas companies with similar or complementary asset portfolios.
The most logical rival would be Beach Energy which tried to take over Innamincka last year but failed.
Certainly punters feel that some takeover action could come after this latest bid, seeing the objective is consolidation of hard to get assets and permits in South Australia’s Cooper Basin.
Innamincka shares jumped more than 40% at one stage to 13.5c but settled back to finish up 29%, or 2.6c, at 11.5c.
As always happens in these bids, shares in the bidding company fell, with Drillsearch seeing a fall of 0.5 of a cent (or 7.8% to 5.9c).
The two companies said in a joint statement that the merged group would be the "leading mid-tier oil and gas company" in the Cooper Basin.
Drillsearch was last year the subject of an unsuccessful takeover proposal by Beach, which wanted to consolidate their permits in the Cooper Basin.
Beach is one of the major players in the region after Santos.
Under the deal announced yesterday, Innamincka shareholders have been offered 2.5 Drillsearch shares for each Innamincka share held.
This gives Innamincka an implied value of 16c per share, based on Drillsearch’s closing price on Monday, before it entered the trading halt, giving Innamincka a price tag of $42 million, compared to its current market capitalisation of about $31.8 million.
The merged entity would have a market capitalisation of more than $150 million and combined oil production of over 300 barrels per day.
Innamincka chairman Adam Johnson said in the statement the planned merger via a scheme of arrangement made "compelling strategic sense, bringing together two highly complementary Cooper Basin asset portfolios".
"It gives Innamincka shareholders exposure to a much larger conventional oil & gas project pipeline, especially expanding shareholders’ exposure to the prolific Western Flank Oil Fairway," Mr Johnson said.
Drillsearch chairman Jim McKerlie said the proposed tie-up would strengthen its wet gas business with the addition of Innamincka’s gas and liquids discoveries.
The two companies said "The merged group will have a quality diversified Cooper Basin portfolio with 2P Reserves of 4.2 mmboe including 2.2 mmbbls of liquids, combined oil production of over 300 bopd growing to 600 bopd with the commencement of production at the Chiton Oil Field.
"The merged group will cement its position as the Cooper Basin’s leading mid-tier oil and gas explorer with a substantial development project pipeline in the Western Cooper Gas & Liquids Project and with the Flax/Juniper Tight Oil Project.
"The merged group will also hold one of the largest positions in the Western Flank Oil Fairway with Beach Energy in PEL 91 (60%) and with Victoria Petroleum in PEL 182 (37.6%). The merged group will also hold a significant position in the Southern Margin Oil Fairway with the positions in the Tintaburra Block JV (11%) and ATP 543P (50% & operator) – both in 2 party joint ventures with Santos Limited.
"The merged group will have improved financial strength to develop these projects and to accelerate exploration activities.
"The merged group will be headquartered in Sydney and Innamincka’s Brisbane office will be maintained to increase the merged groups’ access to technical personnel and resources growing in Queensland due to the rapid expansion of activity around the Queensland CSG projects."
