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 
