The consolidation of the bottom end of the energy sector continues with junior oil and gas explorer Apollo Gas agreeing to a $145 million offer from dart Energy, the spin off from the recently taken over Arrow Energy.
The deal was revealed in statements to the ASX yesterday.
It comes after Drillsearch Energy and Innamincka Petroleum agreed earlier this month to merge in an all paper deal worth around $150 million.
That involved the merging of two companies with complementary interests in and around the Cooper Basin in central Australia.
The Dart- Apollo deal involves not only oil and gas interests, but also coal seam methane in NSW in particular.
Dart said that Apollo’s independent directors had unanimously recommended the proposal in the absence of a better offer.
The all-scrip deal comprises three Dart shares for every four Apollo shares held and three comparable Dart options for every four Apollo options held.
Dart said this gave the target a total implied consideration value of 79 cents per share.
Shares in Apollo and Dart were untraded at 61 cents and $1.05, respectively, after emerging from a trading halt entered into yesterday morning, before the proposed deal was announced.
But the shares in both companies soon jumped, Apollo shares rose almost 30% to 79c, a rise of 18c on the day.
Dart shares were up 4.7% at $1.10, a rise of 5c.
The deal gives Apollo an enterprise value of $145 million (which includes debt). Apollo shareholders will own 22% of Dart, if the deal goes through. Dart is valued at around $440 million.
In a presentation for the bid, Dart said "The agreed transaction is consistent with Dart’s strategy to become the world’s first global CBM company, and to deliver on the milestones established at the time of Dart’s listing in July 2010."
According to Dart, the deal is a good fit with "strategic projects in NSW –both scale and pace options"
It’s "consistent with Dart global strategy of operating in advantaged markets with advantaged pricing capable of rapid commercialisation" and there’s the benefit of "consolidation of existing farm-in agreements & shareholding in Apollo."
It "establishes "critical mass" for Dart in terms of Australian operations and staff base; consistent with International IPO option; brings Dart’s technical expertise and development expertise to bear across entire Apollo portfolio; Apollo’s existing cash funds ongoing operations, and does not alter near-term funding position for balance of Dart business."
And there’s the "near-term potential for establishing a substantial 3P reserve position –targeting 1,500PJ by 2012."
