Gina Rinehart’s Hancock hits back as Strike Energy pushes Warrego investors to back its bid

The long-running bidding war between Strike Energy and Hancock Group continues with a new round of carrots dangled in front of Warrego Energy shareholders.

Gina Rinehart’s Hancock Energy says Strike Energy – the rival bidder for Perth Basin gas producer Warrego – has an “unrealistically inflated” share price as it urges investors to back its cash bid.

Strike, which is Warrego’s joint venture partner at the West Erregulla project in Western Australia – has made a scrip-based bid where Warrego investors will recieve one Strike share for every share they own in the smaller company.

Strike said that offer represented a 62 per cent premium to Warrego’s share price before the bid – and would allow investors to continue to get the benefit from share price increases as the Perth Basin project came to completion.

Strike has already seen off the Kerry Stokes-backed Beach Energy, which had made an offer for Warrego late last year.

Strike last said it and its partners owned 19.9 per cent of Warrego shares and recieved backing from shareholders who held some 10.7 per cent of securities.

Strike shares have risen 52 per cent in the last six months – and 12 per cent in one month – closing at 38c, down 0.5c at the end of trade on Wednesday. Shares in Warrego jumped 192 per cent in 6 months – and 31 per cent in the last month – to also close at 38c.

But in a new bidders’ statement on Wednesday, Hancock urged Warrego shareholders to instead support its offer of 36c per share.

“Strike’s share price continues to be unrealistically inflated and Strike’s scrip offer is inferior to cash as evidenced by three of Warrego’s largest shareholders ... accepting cash for their shares,” the statement reads.

Those three shareholders are Regal Funds Management, Mira LasNubes and Condor Energy – in total representing 32.6 per cent of the Warrego register.

“Strike’s net debt was $1.8m as at 30 September 2022, comprising cash of only $21.1m and drawn debt facilities of $23m,” Hancock said. “Given its limited cash reserves, Strike has entered into a number of debt financing agreements.”

“Hancock considers that strategy of using debt finance to fund appraisal drilling is high-risk, and indicative of Strike’s inability to fund its planned activities in a prudent and orderly manner without being value destructive for its shareholders,” the statement read.