PES - Pure Energy Resources

[Dangerous]

Anatol, You seem to know your stuff. I have heard the following, what do you know?:

1. Arrows gas is all contracted
2. Their reserves are not as good as STO, ORG and QGC (quality of coals or something to do with permeability) and shell may not want them?

-----

See my comments on the Karoon blog (KAR) for my doubts about CSG... I've done well out the stocks, but with Shell having not made a move on AOE i'm getting very nervous

 

[basilio]

Interesting story anatol...

I would have thought that the BG offer at $8.00 was firm until it closed or was upped. If this is correct then I would have thought PES holders risk losing the current premium over $8.00.

Can anyone else throw some light on Anotols ideas? Could PES shareholders be left in the market without either AOE or BG's offer still on the table? Are there any Stock Excahange requirements that would prohibit this? (I seem to remember that laws were changed in the past to stop takeover merchants scoring 50.1% of a company and then leaving the rest of the scrip to fall..)

 

[Ross Walker]

An interesting item contained in Pure's recent target's statement:

If Arrow acquires more than 50% but less than 90% of Pure Shares then:

the Pure share price may fall immediately following the end of the Offer Period and it is unlikely that Pure’s share price will contain any takeover premium; liquidity of Pure’s shares may be lower than at present;

Pure may be removed from the official list of ASX. Arrow has stated in Arrow’s Bidder’s Statement that unless a sufficient spread of shareholders remains after completion of its Offer, it intends to arrange for Pure to be removed from the official list of ASX. If this occurs, Pure Shares will not be able to be bought or sold on ASX;

That last paragraph is a big concern. If Arrow was going to top BG's offer I would have expected an announcement sooner rather than later, as I'm sure there have been Pure holders selling into BG's offer over the last week.

The risk of holding out is becoming considerable. It might not pay to be too greedy (pardon the pun).

 

[Ross Walker]

I would have thought that the BG offer at $8.00 was firm until it closed or was upped.

The BG bidders statement says that the offer can be withdrawn at any time (upon ASIC ok). So if Arrow do manage to get 50% then withdrawal is a real possibility IMHO.

Interesting story anatol...
Could PES shareholders be left in the market without either AOE or BG's offer still on the table?

Given that BG can withdraw their offer at any time, I'm sure Arrow can do the same.

 

[basilio]

Lets see what happens now...

Obviously there will be many happy campers with the PES takeover battle. I came across one particular investor who decided a couple of years ago that energy stocks were the future. He started his own fund and apparently made around $1 billion in June 2008 . (That's not a misprint..)

His holdings at June 2008 included PES and AOE

These days for Mathews it’s all about energy, and as usual he has approached that sector single-mindedly. Last week Mathews Capital emerged with 5.1 per cent of Santos, worth more than $650 million. According to other recent substantial shareholder filings Mathews also owns 12 per cent of Beach Petroleum, worth $100 million, 19.6 million shares in Nexus Energy, 15.4 million in Arrow Energy, 9.6 million in Metgasco and 6.5 million in Pure Energy. On top of that he also owns 93 million shares or 10.5 per cent of Renison.

In 2005 he told the Masters of the Market authors: “Our basic point is that world energy markets will only add 300,000 net barrels of production a day between now and 2010, and yet demand is projected to grow from 84 million barrels a day now to 125 million barrels a day by 2050. So you’re going to have a 50 per cent increase in demand and there’s been almost no significant, major discoveries for 30 years!”

http://peakenergy.blogspot.com/2008/06/australias-peak-oil-billionaire.html

 

[Dukey]

What if ; AOE buys another %16 PES shares over $8 from the market and goes over 50.1% together with Shell, and take the control of PES. (This is what BG wants to do, but they are quite far from doing that for now)

After buying that %16 shares, AOE would not need to buy any more of them at that $8 price. Then they would leave it to the market.

Would BG buy any more at $8 price if AOE goes over 50.1% ? (I wouldn't as there is no meaning for it. It would be waste of money)

If not, what would happen to the SP of the PES shares who are still being hold by their owners. If no one buys, SP will go down. (It is going down now)

Be careful PES holders.

DON'T TRUST TO BG.
They don't know what they are doing. BG should have bought half of ORG last year, or should have bought AOE instead of QGC, plus PES, easily. That would be enough for them. Now they are trying to repair their mistake by paying more money. They paid a lot of money to QGC which does not have a larger CSG reserves than AOE. Also QGC's big acrages (ATP688P in Bowen Basin and ATP769P in Surat Basin) are shared 50% with WCL and there are no certified reserves on these acrages (and the biggest acrage 688P in Bowen basin is not very hopefull because of the volcanic staff mixed in the CSG here). ATP811P (next to PES acarage in Bowen Basin) and ATP693P are already left by WCL as there was no hope for CSG in them. So what is left? There are some acrages in Surat Basin, but they are not enough. Who is left? PES and AOE ! Can BG buy them? Not sure!

It is obvious thaat AOE will not bid for PES anymore.

I would sell PES shares over $8 now and buy AOE shares if I was holding PES shares.

(I am an AOE share holder)

Not so sure about your accuracy Anatol. I'm glad you put your ' I own AOE shares' disclaimer at the bottom - because - to me at least - your post reads like a biased AOE shareholders post would.

Warning to all - emotional attachment to a particular share - for any reason - is dangerous in this game.

As longer term CSG shareholders have realised - It's not about the size of the acreage - but much more about the quality - gas content etc and thickness of the coal seams. The tenements BG (ex-QGC) have with WCL are insignificant compared to their main play in the Walloon coals (651p is it? or 652p?) which is THE BEST there is in QLD in terms of the amount of gas each hole produces. Full stop. Something like 1.5 to 2 MCF per day (Grace - or anyone correct me if I'm wrong anywhere here) which is great for CSG and must surely reduce production costs substantially.

The reason BG want PES - and as far as I'm concerned the only reason they'd pay so much - is because PES have a great tenement right next door to ex-QGC's Walloon play (so did SHG I recall) - BG can bolt it straight on to the LNG pipe and reap the benefits for years to come. There's no risk - they know it's a gusher in CSG terms.
PES's other tenements are added bonuses. but they might amount to bugger all. Most likely none of them are as good as the one next to ex-QGC.

As much as I'd like to see AOE get PES from an 'aussie' point of view - to say that BG - a multnational energy Co - don't know what they're doing.... well it just sounds like a biased AOE holder to me!! They know exactly what they are doing and why and they know what all this gas will be worth in a couple of years time when the world wide recession is history and oil heads sky high forever more.
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EDIT: I should add that that doesn't mean BG will win. - They have the highest offer on the table at them moment, but as Ross walker has pointed out - there maybe other ways for AOE to win the game and they had a head start!
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PS I'm holding AOE, PES, BUL, MEL and considering others.

I expect to make a quid out of all of them!! - though I'm down on BUL, even on MEL. Not considering ESG - not convinced there's value there.

-E.

 

[Ross Walker]

I came across one particular investor who decided a couple of years ago that energy stocks were the future.

That's an interesting quote basilio. I used similar rationale to buy into both Arrow in June 2004 (at 22 cents) and then Pure in June 2007. Peak Oil will probably require a transition into gas to some extent, and GW will probably require a transition from coal into gas. I passed on the Pure float as I suspected their options would be a much more leveraged play with very low risk given the above (assuming you believe in PO and GW). I bought a boat-load of Pure options at around 5 cents so I've got half a million $ riding on the outcome of this Pure sale. I've never dealt with that sort of money on one stock before so I'm starting to think "a bird in the hand".

Arrow's lack of an increased offer today suggests to me they're aiming for 50% in other ways (off-market offers to large investors perhaps). I can't see them making another public offer, otherwise they would have made it before today to secure the Pure director's shares. Perhaps they simply can't afford a higher offer. Whatever the case, I saw the lack of an announcement today as a negative so I sold 2/3rds of my Pure around market close to get the (ever decreasing) premium. Will consider the discussion here before deciding when to sell the remainder. I'd like to hear everyones' take on Arrow's strategy. I'm at a complete loss.

 

[anatol]

Anatol, You seem to know your stuff. I have heard the following, what do you know?:

1. Arrows gas is all contracted
2. Their reserves are not as good as STO, ORG and QGC (quality of coals or something to do with permeability) and shell may not want them?

-----

See my comments on the Karoon blog (KAR) for my doubts about CSG... I've done well out the stocks, but with Shell having not made a move on AOE i'm getting very nervous

I don't think I know much. I am just reading a lot and making analysis with the available data about this CSG industry (and a bit of oil). I have collected all of the tenements and permits in one map and can see them all together. The main thing driving me is my business accumen. I can sense what is coming next after making some analysis.

1. Most of the CSG resources are contracted. I could tell you about QGC; avarage in Wallon Fairway owned from 20%-80% by QGC, the permits in Bowen Basin are 50% shared with WCL. I don't about Origin and Santos. I haven't worked on them as I couldn't make any money our of them.

2. These are certified reserves. They have to comply with standards for being certified. Same thing was told for all CSG business before. It was said the CSG methane would not be accepted in the market. But we can see now, tens of billions of dollars are being invested. I would not bother about the quality of the CSG as long as it complies with standards. Furthermore, this is Australian CSG mate, it may not be very high quality but a steady supply. What else you can ask. Look at the European countries suffering from Russian natural gas supply!

 

[Ross Walker]

PS I'm holding AOE, PES, BUL, MEL and considering others.

I expect to make a quid out of all of them!! - though I'm down on BUL, even on MEL. Not considering ESG - not convinced there's value there.

-E.

Speaking about "life after Pure" I'll probably move more funds into the CSG sector for the reasons I explained in a previous post. I'm heavily weighted in Arrow already but I think they are still cheap given their international plays so I'll be topping up. I looked at BUL recently after you and Grace mentioned it, but after reading their announcements and listening to an audio presentation by one of the BUL reps I was not impressed at all. They have quite large tenements but the quality is marginal, generally 4 to 7 metres I think (barely profitable?). That was the killer for me. Most of their tenements are unexplored so there is still some potential there, but I assume they would have started their drilling program in the most prospective areas. They also seem to use a lot of superlatives and qualifiers in their announcements, which tends to turn me off. Well, I could be completely wrong of course Dukey (and Grace) so I would be interested in your analysis of BUL.

I think ESG has a good chance of becoming a take-over target if and when NSW CSG takes off (have been buying since July 2008), and WCL as a long shot. I bought WCLO options as I don't have much confidence. I'm hoping they'll release some positive announcements to get their options over the line (like Arrow did).

I'll now take a look at MEL. Any others? One thing I am sure of, there will be no more PESs in Qld.

 

[anatol]

An interesting item contained in Pure's recent target's statement:

If Arrow acquires more than 50% but less than 90% of Pure Shares then:

the Pure share price may fall immediately following the end of the Offer Period and it is unlikely that Pure’s share price will contain any takeover premium; liquidity of Pure’s shares may be lower than at present;

Pure may be removed from the official list of ASX. Arrow has stated in Arrow’s Bidder’s Statement that unless a sufficient spread of shareholders remains after completion of its Offer, it intends to arrange for Pure to be removed from the official list of ASX. If this occurs, Pure Shares will not be able to be bought or sold on ASX;

That last paragraph is a big concern. If Arrow was going to top BG's offer I would have expected an announcement sooner rather than later, as I'm sure there have been Pure holders selling into BG's offer over the last week.

The risk of holding out is becoming considerable. It might not pay to be too greedy (pardon the pun).

Thanks Ross. Your explanations are supporting my analysis. I did not read Arrow's Bidder's Statement that carefully. I would do the same (buy PES shares off-market) if I would have Arrow's managament; I would not bid any more than this as I already have 35% (20% plus $15 Shell). Even though the directors of PES selling to BG but there are alot of shares in the market to buy. Someone else can buy the remmaining 15% (which is not much money), then sell to Arrow (Off-market sale) That is possible.

The main trick here is, Arrow won't leave PES. (Vey simple ; They are doing something else as they are not bidding!) PES is the last one in the market. (I don't beleive BOW, Blue Energy, Molopo are any good for those big guys, even not for Arrow). If Arrow lets PES goes to BG, Arrow itself will be a takeover target. Then end of Shell's play in CSG.

So the smart management of Arrow will do the right actions. (The only stupidy that have done, they did not put the takeover bid for PES long time ago, before Oct. 2008. Maybe they did not have the money or the confidence that time)

 

[Dukey]

Speaking about "life after Pure" I'll probably move more funds into the CSG sector for the reasons I explained in a previous post. I'm heavily weighted in Arrow already but I think they are still cheap given their international plays so I'll be topping up. I looked at BUL recently after you and Grace mentioned it, but after reading their announcements and listening to an audio presentation by one of the BUL reps I was not impressed at all. They have quite large tenements but the quality is marginal, generally 4 to 7 metres I think (barely profitable?). That was the killer for me. Most of their tenements are unexplored so there is still some potential there, but I assume they would have started their drilling program in the most prospective areas. They also seem to use a lot of superlatives and qualifiers in their announcements, which tends to turn me off. Well, I could be completely wrong of course Dukey (and Grace) so I would be interested in your analysis of BUL.

I think ESG has a good chance of becoming a take-over target if and when NSW CSG takes off (have been buying since July 2008), and WCL as a long shot. I bought WCLO options as I don't have much confidence. I'm hoping they'll release some positive announcements to get their options over the line (like Arrow did).

I'll now take a look at MEL. Any others? One thing I am sure of, there will be no more PESs in Qld.

I agree Ross. BUL tenements have so far shown pretty ordinary quality - ie thin coal seams resulting in not much gas. I believe that is the key for CSG. - Quality of the tenement (ie energy per hole) - not quality of the gas ( Gas is Gas is Gas - more or less) I bought BUL cause they seemed very cheap and figured they were worth the punt that some tenements will pay off eventually.

I want to look closer at BOW and ICN in qld - there might be something worth getting a piece of - but they don't have anything like what PES has/had.

MEL seems to have plenty of gas in place and good location, and undervalued I think.
ESG - nothing against them but they seem to move slowly and I just can't see how they are worth 8 to 10 times what MEL is at the moment!!

And yes - AOE - should still have a big future even if they lose PES. Plenty of international deals to soften the blow.

Re: PES - with so much at stake probably a good decision to sell some and lock in profits. Wish to hell I had those kind of numbers to worry about Ross!!
-E

 

[basilio]

PES is opening at $8.06 after Pure directors announce they will sell their shares to BG at $8.00. But interestingly there are buy orders for 2 million shares at $8.05. And the shares are now rising. Perhaps there is still more to this play...

 

[Ross Walker]

But interestingly there are buy orders for 2 million shares at $8.05. And the shares are now rising. Perhaps there is still more to this play...

Yes, saw that. I suspect that Arrow has others buying on their behalf, especially when their most recent announcement states "Selling your Pure shares on the ASX provides any shareholder who wants a cash only exit now with a quicker and currently more attractive offer than the BG offer."

They also state:
"Arrow notes that BG has not yet declared its offer price final and BG’s offer must remain open until 23 March 2009."

yet BG's announcement does not state this condition at all:

"This Offer may be withdrawn with the consent in writing of ASIC, which
consent may be subject to conditions. If ASIC gives such consent, BG
AUS will give notice of the withdrawal to ASX and to Pure and will
comply with any other conditions imposed by ASIC."

Anybody know if Arrow's statement is correct? Must the offer stay open until March 23rd?

I'm not sure what game Arrow is trying to play, but it would have been more helpful to shareholders if they had released this announcement yesterday, before the Pure directors' acceptance deadline

Never mind, I locked in some profits yesterday and I still have a reasonable holding to take advantage of any further upside.

 

[Ross Walker]

I believe that is the key for CSG. - Quality of the tenement (ie energy per hole) - not quality of the gas ( Gas is Gas is Gas - more or less)

Yes I agree completely.

I want to look closer at BOW and ICN in qld - there might be something worth getting a piece of - but they don't have anything like what PES has/had.

I noted BOW previously but haven't had a chance to read their announcements yet. I'll take a look at ICN; that's a new one for me.

ESG - nothing against them but they seem to move slowly and I just can't see how they are worth 8 to 10 times what MEL is at the moment!!

Take a look at their recent presentation:
http://imagesignal.comsec.com.au/asxdata/20090226/pdf/00931133.pdf
It contains some interesting data including:
"ESG has the Largest Acreage on the East Coast"
I'm not sure if it is all good quality, but they have measured coal thicknesses varying from 50 to 140 feet! I'm sure there will be plenty of CSG in there.

They also include a slide which states the A$/Mcf paid for most of the major takeovers to date. That averages to about $2.80/PJ 2P and $1.10/PJ 3P. This values ESG at around 80c/share (218PJ 2P) or $1.30/share (845PJ 3P). These estimates are always rubbery of course. DYOR I'll be adding to my stash whenever there are reasonable dips in their share price.

Cheers.

 

[basilio]

Just noticed that huge blocks of shares were sold at opening and while PES was $8.05 . 2mill plus. And at 10.30 AOE makes its announcement effectively saying it is still in the game. Trying to work out why this announcement was not made either yesterday or at least before the opening of the market.

Would be very interested to know who made the purchases in the first 30 minutes and if they are associated with AOE.

 

[oldblue]

I think that if AOE had made that announcement yesterday, worded as it was, it might have been seen as misleading the market into thinking that a revised offer was going to be made at the last minute.
They would have had a lot of explaining to do if it had sparked off a further speculative run on the PES SP.

Just IMO.

 

[Mad Mel]

I noted BOW previously but haven't had a chance to read their announcements yet. I'll take a look at ICN; that's a new one for me.

For what it's worth, my digging around indicates that these are the smaller public companies which have leases in their name around the QLD Walloon area: BOW, BUL, ICN, VPE, RAW. There are probably others with partial ownership such as WCL, not sure if MPO or AJL have any more rights.

But it's entirely possible I've missed a few.

ICN's starting a drilling program tout-suite, I think.

 

[Dangerous]

I don't think I know much. I am just reading a lot and making analysis with the available data about this CSG industry (and a bit of oil). I have collected all of the tenements and permits in one map and can see them all together. The main thing driving me is my business accumen. I can sense what is coming next after making some analysis.

1. Most of the CSG resources are contracted. I could tell you about QGC; avarage in Wallon Fairway owned from 20%-80% by QGC, the permits in Bowen Basin are 50% shared with WCL. I don't about Origin and Santos. I haven't worked on them as I couldn't make any money our of them.

2. These are certified reserves. They have to comply with standards for being certified. Same thing was told for all CSG business before. It was said the CSG methane would not be accepted in the market. But we can see now, tens of billions of dollars are being invested. I would not bother about the quality of the CSG as long as it complies with standards. Furthermore, this is Australian CSG mate, it may not be very high quality but a steady supply. What else you can ask. Look at the European countries suffering from Russian natural gas supply!

report to market showed 75% of 2P is uncontracted

Certification is a little loose IMO... it is very easy to prove up reserves. That is why i think co's undertaking what appear to be agressive drilling campaings like ESG will prob get their targets

 

[Dangerous]

For what it's worth, my digging around indicates that these are the smaller public companies which have leases in their name around the QLD Walloon area: BOW, BUL, ICN, VPE, RAW. There are probably others with partial ownership such as WCL, not sure if MPO or AJL have any more rights.

But it's entirely possible I've missed a few.

ICN's starting a drilling program tout-suite, I think.

VPE and BOW the only two worth a look IMO. Two old QGC founders bought 12% of the VPE stock in Dec. 20% owned by QGC as well

 

[Mad Mel]

VPE and BOW the only two worth a look IMO. Two old QGC founders bought 12% of the VPE stock in Dec. 20% owned by QGC as well

I agree, I think generally BUL's are pretty far out on the fringe, and RAW is too deep, as is most of ICN's two leases. Though they might get lucky on the east side of 626.

I don't understand VPE very well yet, they seem pretty diverse so perhaps selling off their CBM leases won't be that big a bonanza? I dunno, I should caveat all of this by saying I'm a newbie trader.

BOW's holdings look about as close to the action as you're gonna get these days, and they've got some interesting tenements elsewhere, such as Canaway Ridge and Bowen Basin, who knows, maybe those turn out to be the diamonds in the rough at the end of the day.