Strike Energy has dealt itself back into the battle for Warrego Energy, its 50% partner in the West Erregulla gas field near Perth.
Strike’s ambitions for Warrego had seemingly been pushed aside after its initial all-paper bid valued at around 18 cents per Warrego share was overtaken by a number of competing bids from both Beach Energy and Gina Rinehart’s Hancock Energy, whose 28 cents per share offer makes it the current clubhouse leader.
A decision from Warrego’s board is due to be revealed next Monday.
But now Strike has reappeared and grabbed a blocking 19.9% stake in Warrego through some fancy stockmarket dancing.
In a statement to the ASX on Wednesday morning, Strike explained that it had “entered into Share Purchase Agreements with various Warrego shareholders to increase its shareholding in Warrego to around 19.9% via the swap of Strike ordinary shares for Warrego ordinary shares at a 1:1 share exchange ratio.
“Strike will have the voting rights to around 19.9% of Warrego. Post settlement of the share swaps, Strike will become Warrego’s largest shareholder and will increase Strike’s direct and indirect ownership of EP469, which contains the West Erregulla gas field and near field low risk upside, to approximately 60%.”
“For the avoidance of doubt, Strike’s Board has not formed any intention with regards to any future transaction that may involve Warrego, and Strike is currently considering all available strategic options.”
Strike CEO, Stuart Nicholls said in the statement:
“Strike has a strong track record of identifying and securing valuable and strategic energy assets at various stages of maturity. The expansion of our ownership of Warrego shares and the resulting look through to an increased economic interest in the West Erregulla gas field is a further demonstration of this.”
Strike also revealed that it will settle the share swaps via off-market transfers and is expected to occur within the next week, at which time the Strike consideration shares will be issued and application will be made for their quotation on the ASX.
Before trading started yesterday, Strike shares were trading at just over 34 cents, which would suggest a margin over the Hancock Energy offer of six cents. That seems to have risen to 8 cents with a 6% plus rise in the price of Strike shares to 36.5 cents at Wednesday’s close.
Strike’s move could mean Beach is no longer a contender because it’s scheme of arrangement offer needs 100% of Warrego’s shares. Hancock Energy has not put any conditions on its offer and could buy shares in the open market if it wants to.
Strike and Warrego jointly controlled gas field is not producing but Beach and Mitsui control the Waitsia nearby. Mitsui’s plans to develop the field at a cost of more than $760 million have been hit by the collapse of its contractor, Clough Australia.
A probable outcome would be for Strike to do a deal with beach and Mitsui to grab Warrego and amalgamate the two fields with a stage development plan that sees the costs and revenues from Waitsia finance the development of West Erregulla and several smaller structures though to be in the area.
With Strike shares at 36.5 cents, Warrego shares look a bargain at 30.5 cents, but that’s questionable given all the known unknowns in this increasingly complex situation.
Beach shares were down nearly 10% at $1.64. Yes, oil prices are weakening but was yesterday’s share price fall a judgement from some investors that Beach is being squeezed out of the Warrego play? Beach can certainly deal itself back in, if it and its 30% shareholder Kerry Stokes both want to, along with Mitsui.
