By Peter Milne
The board of Perth Basin gas developer Warrego Energy has split on whether shareholders should accept a $342 million cash takeover offer from Gina Rinehart’s Hancock Energy with Warrego chair Greg Columbus backing partner Strike Energy’s all-scrip offer.
Warrego’s other three directors support Hancock’s 28-cents-a-share offer that closes on Saturday, but Michael Atkins said the decision was not clear-cut and shareholders with a higher risk appetite might prefer to take Strike Energy scrip that values Warrego shares at about 32 cents each.
Warrego share were trading at 31 cents on Friday.
Hancock Energy’s bid for Warrego Energy had split the target’s board.Credit: Getty
Warrego’s Target’s statement issued on Friday is the latest move in a battle for the West Erregula onshore gas field north of Perth that Warrego and Strike each have a 50 per cent stake in.
Strike Energy started the race for Warrego with an all-scrip offer on November 10 and Beach Energy, which has other Perth Basin interests, followed a day later with a 20 cents a share cash offer.
Hancock Energy joined the fray three weeks later offering 23 cents a share that Beach beat by two cents days later. However, the Kerry Stokes-controlled company pulled out of the bidding war after Hancock bid 28 cents a share.
Meanwhile, Strike increased its stake in Warrego to 19.9 per cent and on Friday in its response to Warrego’s target statement listed shareholders willing to accept its scrip offer that collectively hold another 20.5 per cent of its partner.
Atkins said the choice for Warrego’s shareholders was the certainty of cash from Hancock or the promise of higher risk of the “considerable potential upside in Strike being a major Perth Basin player.”
Columbus said shares in a combined Strike and Warrego “would have an enhanced equity market presence, greater liquidity and potentially a stronger institutional share register, all of which could make the combined business a greater target for further takeover activity.”
Interest in the Perth Basin is being driven by relatively low production costs, a forecast gas shortage in WA late this decade, possible downstream processing including a urea plant proposed by Strike, and the opportunity to export gas through Woodside’s North West Shelf LNG plant that will have increasing spare capacity as its own supply dwindles.
Access to export markets will require WA Premier Mark McGowan to grant exemptions to a ban on the export of onshore gas. Currently, the Waitsia field owned by Beach and Mitsui, has the only exemption with exports planned to start in late 2023.
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