http://au.finance.yahoo.com/news/Innamincka-shares-Drillsearch-aap-3737509807.html?x=0
Shares in Innamincka Petroleum Ltd soared after it agreed to a friendly merger with Drillsearch Energy Ltd to create a mid tier oil and gas company.
The planned merger of Innamincka, an oil and gas explorer, with Drillsearch, an oil and gas producer, is the latest proposal in a wave of efforts to consolidate permits in South Australia's Cooper Basin.
The merged entity would have a market capitalisation of more than $150 million and combined oil production of over 300 barrels per day.
This would rise to 600 barrels per day with the start of production at the Chiton oil field in the Cooper Basin's Western Flank Oil Fairway.
Innamincka chairman Adam Johnson said 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.
Drillsearch on Tuesday increased its interest in four wet gas discoveries in the Cooper Basin.
Shares in Innamincka jumped more than 40 per cent to 13.5 cents in early trade but settled back to close at 11.5 cents, up 2.6 cents, or 29.21 per cent.
However, shares in Drillsearch eased half a cent, or 7.81 per cent, to 5.9 cents after emerging from a trading halt entered into on Tuesday.
The combined entity would be the "leading mid-tier oil and gas company" in the Cooper Basin, the companies said in a joint statement on Wednesday.
Lawyers Norton Rose Australia, the legal adviser to Innamincka, said the deal reflected the growing trend for the consolidation of junior to mid-cap oil and gas companies with complementary asset portfolios.
Drillsearch was last year the subject of an unsuccessful takeover proposal by Beach Petroleum Ltd, which wanted to consolidate the companies' permits in the Cooper Basin.
Ground in the Cooper Basin is tightly held, so companies seeking to increase their landholdings in the hydrocarbon-rich area need to do so through acquisition.
Under the deal announced on Wednesday, Innamincka shareholders have been offered 2.5 Drillsearch shares for each Innamincka share held.
This gives Innamincka an implied value of 16 cents per share, based on Drillsearch's closing price on Monday, before it entered the trading halt. It also gives Innamincka a price tag of $41.8 million, compared to its current market capitalisation of about $31.8 million.
The proposal requires Innamincka shareholder and court approval.