AOE - Arrow Energy

Dangerous · 9 February 2009

anatol said:
Guys !
What's happening?

Shell owns 30% of of Arrow, Arrow owns 30% of PES, but BG wants to buy PES ?

What is BG trying to do?

I didn't quite understand.

Bg also says they owns 10% of PES! And they won't sell it to Arrow, as they down't want to own Arrow shares.

Do they want to own whole Arrow shares or what?

I am confused !

Any ideas!

... and QGC have hired an ex-Shell employee to be the next MD

http://www.news.com.au/couriermail/story/0,23739,24976865-3122,00.html

Dukey · 9 February 2009

bassmanpete said:
I think cash + AOE shares is the more attractive option whatever the price of AOE is at the time the offer is taken up. I say that from the point of view of one who would hold onto AOE with the expectation of it going a lot higher in the long term. Obviously those who would immediately sell the AOE shares would have a different opinion.

I've held AOE since 2004 when they were 40 cents so I'm laughing anyway

I expect most folk would simply take the $$ from the highest bidder - you can buy more AOE the next day if you like...or earlier!!
I really think AOE might have suspected this would happen and won't want to lose PES - so another offer is a distinct possibility... in my view.
.

grace · 9 February 2009

I will also post this here, on Business Spectator tonight.

"Shells last chance" and some of the story below

http://www.businessspectator.com.au/bs.nsf/Article/Shells-last-chance-$pd20090209-P48KQ?OpenDocument&src=sph

It is conceivable that Shell could get more heavily involved. Pure’s acreage is appealing to Arrow and Shell because it would beef up their reserves base in the event that Shell decides to proceed with the building of an export LNG plant fed by coal-seam gas at Gladstone. Last year Shell paid $776 million to acquire a 30 per cent interest in Arrow’s coal seam gas acreage.

Shell hasn’t been as aggressive in acquiring a Queensland coal-seam gas exposure as BG, Petronas and ConocoPhillips but it wouldn’t want to be boxed into a position as a minor player either.

Pure is, however, probably worth more to BG than to Arrow or Shell. Around about the time Arrow unveiled its bid for Pure, BG was wrapping up its $5 billion acquisition of Queensland Gas (QGC). Pure’s best acreage is adjacent to QGC’s, so a successful bid for Pure would provide significant development and production synergies.

For BG, there would also be some option value in a Pure acquisition. QGC probably has the reserves to support a two-train LNG plant at Gladstone but adding acreage and reserves would give BG both security and the option of expanding the plant in future. All the prospective Queensland LNG rivals are focused on the longterm security of their resource bases.

anatol · 10 February 2009

IMO, this attack of BG is not only targeting PES, it is also targeting Arrow. There is nothing Arrow could do with BG bid for PES here. (I mean it is not acting all alone now) Arrow makes all of its plans according to Shell's plan which is not clear or I don't know! Arrow will ask to Shell what to do; Increase or do nothing? BG is testing Shell's startegic plan and detemination for CSG/LNG as Shell looked very quite so far. BG wants to bring it up.

As I said previously in December, Shell does not have any other choice if it wants to stay in this game here.

If Shell won't tell Arrow to buy PES in any price, BG will buy PES, and then will put a bid on Arrow as Arrow would be a small player in CSG/LNG game who nobody wants. But it would be a good stake for BG. Then BG could reach to a reserve size close to Origin reserves (maybe, I am not sure)

oldblue · 10 February 2009

So the odds on Shell making a compelling bid for both AOE and PES is pretty strong, IMO.
That is, if they are really serious about Australian CSM resources.

Logique · 10 February 2009

PES holders are in a good position, but it's tricky now for AOE holders.

- if AOE get into an elevated bidding war for PES, I see that as a short term negative for the AOE share price, i.e. they may pay too much.

- however if AOE-Shell allow BG to takeover PES, I see that also as a negative, because AOE could become a marginalised CSM player.

- if you continue to hold AOE you have to hope that Shell decide to wade in seriously and make a bid for PES and/or AOE. There is no guarantee that this will happen, so there will be nervousness about potential downside here.

Dangerous · 10 February 2009

BPT interest in tipton west at $2/GJ on 2P is worth more than their market cap ($2/GJ x 467PJ=$934M) ... I expect to see some buying for BPT soon

Will the old glacier - Shell - melt under the pressure from BG? Interesting times for CSG again!

anatol · 10 February 2009

Yes, it creates some nervousness!

IMO, BG is actually targeting AOE. PES is much better with AOE (see the location of their tenements, very close). Not very good without AOE.

BG may put a hostile bid to AOE soon, and leave PES. Who would be going to buy PES then, other than AOE who would be under hostile bid of BG.

What BG has done yesterday is, pushed the price of PES up. BG does not look like a serious buyer at this stage, but looks like they have a different strategy. They are trying to create some obstacles for AOE and testing Shell.

If you look at PES price now, it is still going up. That is not very healthy. Who is going to buy it now? At what price? very strange. This situatuon is going the brake in some point.

Logique · 11 February 2009

The most obvious question is why would PES holders sell to anybody. The value of the stock keeps rising.

BG offered $6.40 cash, and their offer is conditional on a minimum 50.1% of PES being acquired.

AOE offered $2.70 cash plus 1.21 AOE shares, which equates to $5.96 per PES share on the current sp of AOE ($2.70). AOE say their offer is conditional on 90% acquisition. With BG owning ~10% of PES, they could potentially block AOE's full acquisition of PES.

So what are PES holders to do - if they are going to sell at all. The AOE offer might be the best choice long term, with some cash now, but also the AOE scrip component offering ongoing participation and gains in the CSG industry.

But to be fair to BG, their cash offer will be good for those PES holders who may need the money right now.

This could turn into a game of brinkmanship between BG and AOE-Shell, and for that matter PES holders - why should they sell to either suitor. A period of uncertainty lies ahead.

Dangerous · 11 February 2009

my ownership calcs are

AOE 19.98%
Shell 14.88%
BG 10.00%
Tot 44.86%

Outstanding 55.14%

However, 5.31% of the stock has been bought on the market in the last two days (yes, some could be turned over multiple times), but if another 12M go on the market, BG will not be able to get the additional 40% they require.

Am i correct in saying this will get very, very interesting and are the assumptions above incorrect?

Thanks folks

Logique · 11 February 2009

I think AOE would/should want to get at least 50.1% minus (19.98% + 14.88%) = a further 15.24% of the notionally uncommitted PES shares, i.e. a controlling stake in PES.

Easier as you say, for AOE to achieve this than for BG to get 50.1 minus 10 = a further 40.1%, but they are making sure AOE have to pay a premium.

Could all end in a stalemate.

Logique · 12 February 2009

Quoting Basilio over on the PES thread last night:
Game on. Arrow has upped the offer to $3.00 plus 1.57 AOE shares for each PES shares. Value is stated as $7.16.

More significantly they have abandoned the 90% minimum (wonder why ) and want to roll this up very quickly. They want to start taking shares from tomorrow (Feb 12th)

Thought it was a bit fascinating how they claimed PES offered excellent proven resources and potentially a ton more on the rest of the tenement. So why the scungy initial offer?

Any thoughts on how high this could go? And do shareholders who don't sell early obtain the final price?

AOE had to raise their offer if they were serious (as BG well knows). It's a good signal for the long term intentions of AOE and Shell.

From the link under: BG has left its run late. Arrow unveiled its cash and scrip bid for Pure in late December and dispatched its bidder’s statement last week. It has claimed the support of a fraction under 50 per cent of Pure’s register, including a 19.9 per cent shareholding of its own, a 14.9 per cent stake held by Shell and 11 per cent by Pure’s directors.

http://www.businessspectator.com.au/bs.nsf/Article/Shells-last-chance-$pd20090209-P48KQ?OpenDocument&src=sph This seems odd, why would Shell spend millions buying into a deal with Arrow, only to sell it's PES holding to a rival bidder in BG? Doesn't seem likely, and anyway the new AOE bid for PES is now the superior one.

jancha · 12 February 2009

Hi,
Excuse my lack of knowledge in trading. Bg put out this morning notification of a proposed counter offer for Pure Energy for the 18th next week? Adjust. Does that mean no trading AOE & PES till then?

oldblue · 12 February 2009

Both are trading.
PES up 9%, AOE down 6%.

BG's announcement shouldn't cause either to be suspended.

jancha · 12 February 2009

I guess adjust means to adjust. With that news brought out by Bg why would AOE fall in sp? What would become of Arrow if they aren't successful in their bid?

TheAbyss · 12 February 2009

jancha said:
I guess adjust means to adjust. With that news brought out by Bg why would AOE fall in sp? What would become of Arrow if they aren't successful in their bid?

The drop in Sp is more than likely some doubt around whether AOE are paying too much for PES now and will this even get the deal over the line or will AOE have to offer even more when BG counter next week.

BG have advised they want some time to consider their options. Remember they have pulled out of a bidding war before so they may circle their wagons again here.

Not a lot of other options if they want to secure supply of resources other than PES unless they take another tilt at a bigger fish than PES such as STO, ORG etc. Who knows they may even talk to Shell about AOE.

Other than these guys the rest are small fish such as Bow and VPE etc which BG already have a piece of via their QGC acquisition.

oldblue · 12 February 2009

Getting PES would be great for AOE but missing out wouldn't be fatal. At the very least there is a very nice consolation prize in that they hold 19.98% of PES and can either do a deal with BG or hang in there. ( And maybe turn their attention to someone else such as BOW or VPE.)

It looks like the market is marking down AOE either on concern that they miss out on PES or that they end up bidding up the price and paying too much.

Exciting times, especially for PES shareholders!

Disc: Holding AOE and BOW.

jancha · 12 February 2009

Thanks Abyss
If Arrow aren't successful in their bid maybe Shell will step in to the bidding on their own.

jancha · 12 February 2009

Change in substantial holding with Arrow. Do i detect a bit of nervousness out there? I sure am. Best senario is if bg walks away after doing their sums come Wednesday.

anatol · 13 February 2009

I still beleive BG will put a hostile bid for buying AOE if they are not stupid.

Let's have a look at this calculation;

PES price goes up to $1b if BG bids again.

AOE has 20% of total gross certified gas reserves of QLD. PES has only 5%.

AOE's market value is $1.8b now. It is undervalued, isn't it.

If BG doubles the market price of AOE and put a bid for $3.6b, that would justifiy PES's $1b price. Also, PES would be coming in that $3.6b, wouldn't it?

Or BG could pay $5b together with PES.

Guys, BG has big dollars. They wanted to buy Origin for $13.8b, couldnt get it. They paid $5.3b for QGC, and they still have $8.5b to spend on this business. Why wouldn't pay $5b to AOE together with PES and finish this coas. What would Shell do in that case? it is a problem, but not unsolvable. They both have other businesses around the world, BG might make a favour to Shell in another part of the world later on.

I am a AOE holder and hoping this to be true, in deed.
However PES holders should be carefull if BG turns its bid to AOE. There are not any other crazy giant like BG to pay this much to PES. AOE's bid might come back to $5.8 under the new conditions.

AOE - Arrow Energy

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