Recommended Takeover of Ambassador by Drillsearch

Source: www.gulfoilandgas.com 5/28/2014, Location: Not categorized

Drillsearch Energy Limited and Ambassador Oil and Gas Limited have entered into a Bid Implementation Agreement under which Drillsearch will make an off-market takeover offer (Offer), via its wholly owned subsidiary Drillsearch (Central) Pty Limited, for all of the ordinary shares in Ambassador that it does not already have a relevant interest in.

The Directors of Ambassador have unanimously resolved to recommend that shareholders accept the Offer, in the absence of a superior proposal. The Offer will be subject to certain terms and conditions which are summarised in Schedule 1. The full conditions to the Offer will be set out in the Bidder's Statement which Drillsearch expects to dispatch to Ambassador shareholders within the next 2-3 weeks. Ambassador has given its consent to the early dispatch of the Bidder's Statement. Ambassador will issue a Target’s Statement to Ambassador shareholders following dispatch of the Bidder’s Statement.

Significant premium
Ambassador shareholders will be offered one Drillsearch share for every 5.4 Ambassador shares. The Offer implies a value of $0.293 per Ambassador share based on the closing price of Drillsearch shares of $1.58 on Tuesday 27 May, the trading day prior to this announcement.

The implied Offer price represents a substantial premium of: • 50% to the closing price of Ambassador shares of $0.195 on Friday 23 May 2014, the trading day prior to Ambassador entering into a trading halt pending announcement of the Offer;
• 51% to the 3 month historical volume weighted average price (VWAP) of Ambassador shares of $0.193; and
• 56% to the 6 month VWAP of Ambassador shares of $0.188; and
• 60% to the 9 month VWAP of Ambassador shares of $0.183

Ambassador has approximately 142.1 million shares outstanding. At the Offer ratio, Drillsearch plans to issue approximately 26.3 million shares in order to acquire 100% of Ambassador, equivalent to 6.1% of Drillsearch’s issued share capital. Ambassador shareholders will own approximately 5.7% of Drillsearch if Drillsearch acquires 100% of Ambassador.

Consolidating Interests in Northern Cooper Wet Gas The Boards of both Ambassador and Drillsearch believe that there is a compelling strategic rationale for the transaction, which consolidates Drillsearch’s dominant position in the Northern Cooper Wet Gas area by combining Ambassador’s 47.5% non-operated interest in PEL 570 with Drillsearch’s 80% owned and operated interest in the adjacent PEL 101.

Drillsearch entered the northern area of the Cooper Basin in 2013 through its acquisition of Acer Energy Limited. Following completion of the takeover, Drillsearch acquired the 413km2 Coolibah 3D seismic survey over PEL 101 and adjacent areas of PEL 570 and PEL 182. There are three existing wet gas discoveries in PEL 101, plus the Vanessa wet gas discovery located in permit PEL 182 immediately to the west.

The Coolibah 3D seismic survey was designed to high-grade the existing discoveries in advance of a comprehensive appraisal and development drilling program. The survey identified significant additional prospectivity in the area for liquids-rich conventional gas in combined structural and stratigraphic traps, and confirmed the presence of potentially prospective Toolachee Formation channels extending across PEL 101 and PEL 570. In FY2015, Drillsearch plans to commence a two-year appraisal and development campaign in PEL 101 to further de-risk the conventional prospectivity of the permit, which has the potential to generate significant value across the combined seismic area.

Drillsearch considers that the broader Northern Cooper Wet Gas project area is analogous to Drillsearch’s Western Cooper Wet Gas project area and to the Greater Tindilpie complex in the southern Patchawarra Trough which is under development by the Santos-operated South Australian Cooper Basin Joint Venture. The Greater Tindilpie complex has generated significant gas reserves in the Patchawarra Trough and demonstrated substantial tight sands potential throughout the Permian section, the same zones being appraised by Drillsearch in PEL 101.

Fully Carried Work Program
In PEL 570 Ambassador is fully carried by New Standard Energy (New Standard) for a $42.5 million exploration program. The program specifically targets the permit’s unconventional resource potential in the tight sands and shale in the Permian section of the Patchawarra Trough. This program is to be operated by New Standard Energy, with technical support from experienced US unconventional E&P company Magnum Hunter Resources (NYSE: MHR) which has also taken a 17% interest in New Standard. The carry will give Drillsearch shareholders exposure to the unconventional potential of the liquids-rich, lower temperature, stress, and CO2 play areas of the Patchawarra Trough for no capital outlay throughout the carry period.

By offering Drillsearch shares in exchange for Ambassador shares, Ambassador shareholders retain exposure to the upside potential of Ambassador’s assets and also gain exposure to the following:
• A profitable mid-tier ASX oil and gas company focused on growing reserves, production and cash flow
• Record production anticipated to be at the higher end of a range of 3.0 to 3.3 million barrels in FY2014
• A balanced portfolio focused solely on the Cooper Basin that includes:
• Exposure to a prolific Oil Business on the Western Flank
• A Wet Gas Business pursuing commercialisation of a number of existing discoveries in the Western and Northern Cooper areas
• An active Unconventional exploration program focused on ATP 940P in the Nappamerri Trough

Commenting on the Offer, Mr David Shaw, the Chairman of Ambassador, said: "The Offer represents a compelling opportunity for all Ambassador shareholders to capture a premium for their shareholding, retain exposure to Ambassador’s key asset, and to become part of a profitable mid-tier oil and gas producer. The Directors have unanimously resolved to recommend that shareholders accept the Offer, in the absence of a superior proposal."

Drillsearch Chairman Mr Jim McKerlie said: “This transaction offers Drillsearch a significant opportunity to consolidate the company’s dominant position in the wet gas fairway in the northern part of the Cooper Basin through combining an interest in PEL 570 with adjacent permit PEL 101. The Coolibah 3D seismic survey has substantially de-risked both permits and identified significant prospectivity in the area, both in terms of conventional wet gas and the unconventional exploration being pursued by the existing PEL 570 joint venture.”

Directors' unanimous recommendation
The Directors of Ambassador have unanimously resolved to recommend that shareholders accept the Offer, in the absence of a superior proposal.

Support of major shareholders
The terms of the Offer are supported by a number of Ambassador's major shareholders.

Drillsearch has entered into acquisition agreements with several Ambassador shareholders under which it has agreed to acquire a total of 19.9% of Ambassador at an offer price of 1 Drillsearch share for every 5.4 Ambassador shares (i.e. the same consideration as under the Offer). In addition, Mrs Fotoula Hatziladas and Eye Investment Fund Ltd, who collectively hold 17.6% of Ambassador, have advised Ambassador that they intend to accept the Offer within 14 days from the opening of the Offer in the absence of a superior offer.

Bid Implementation Agreement
The Bid Implementation Agreement includes customary deal protections including no shop and no talk provisions, break fee provisions and various other provisions relating to the Offer.

Indicative timetable
The Bidder’s Statement is expected to be lodged with ASIC, Ambassador and released to the ASX around the middle of June and dispatched to Ambassador shareholders shortly thereafter. Ambassador has given its consent under section 633(1) of the Corporations Act to the early dispatch of the Bidder’s Statement by Drillsearch.

A Target’s Statement is expected to be released and dispatched to Ambassador shareholders at the end of June or early July.

For more information about related Opportunities and Key Players visit Shale Gas Projects


Related Categories: Coalbed Methane  General  Heavy Oil  Methane Clathrate  Oil Sands  Oil Shale  Shale Gas  Tight Gas  Tight Oil 

Related Articles: Coalbed Methane  General  Heavy Oil  Methane Clathrate  Oil Sands  Oil Shale  Shale Gas  Tight Gas  Tight Oil 


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