Billionaire Rinehart uses cash advantage in her bid for gas explorer Warrego

The little-known gas explorer has suddenly become the object of desire among Perth’s billionaire set.

Western Australia’s billionaires are battling it out for gas. Picture: Bloomberg

Gina Rinehart has played the golden cash card in her determination to secure WA gas junior Warrego, and is now within reach of becoming an influential player in the onshore west coast energy market.

The mining magnate got some 11th-hour help from rival billionaire Chris Ellison of Mineral Resources, who has his own interest in keeping the peace throughout the Perth Basin – the little-explored gas-rich region that is now becoming as hot as a lithium strike.

Chris Ellison’s Mineral Resources is a major gas explorer in the Perth Basin.

In recent months the little-known Warrego has become the object of desire among Perth’s billionaire set, fielding offers from Kerry Stokes and Rinehart. Even Andrew Forrest – at some distance – is believed to have had a look at the gas play that has a non-operational stake in the new West Erregulla gas field. While Forrest’s energy demands at his Fortescue mines are significant, a Warrego deal would have sat uneasy with his renewables push. Stokes, became a serious player for Warrego with his Beach Energy securing backing for a friendly deal, but exited the race when Rinehart stepped in, rightly anticipating bidding competition was about to move sky high.

Ellison’s Wednesday night swoop on a 15 per cent blocking stake in Warrego clearly put a spanner in the works for rival bidder the John Poynton-chaired Strike Energy which as joint venture partner and field operator of Erregulla would have preferred a neater fit.

Strike was looking for a merger by the way of a scheme of arrangement where 75 per cent approval is needed, and had hoped to secure the 15 per cent stake that is now sitting with Ellison’s MinRes. This effectively means Strike’s all-script bid is all but dead in the water.

Rinehart on Thursday delivered a $447m blow. She sweetened her bid to 36c a share – from 28c previously on the condition she can cross the 40 per cent mark. By already sitting on a 25 per cent stake – including managing director Dennis Donald’s stake – and all but backing in Ellison’s 15 per cent, this will get her on the way to the key condition.

Gina Rinehart raised her bid for Warrego

The Macquarie-advised Strike already sought to preserve cash with a one-for-one all scrip bid and now has little room to move for its own sweetener to match Rinehart.

From now it’s a matter of Rinehart drawing out the support that Strike had been counting on to move past 50 per cent. This includes Warrego’s holdout chairman Greg Columbus who shortly before Christmas split with the board and is voting his 3.2 per cent stake with Strike

Ellison has a major interest in how the battle for Warrego plays out. He owns the Lockyer Deep gas field next to Warrego’s acreage and over recent years has been looking for ways to expand his holdings. He has talked up the potential of using a portion of the gas reserves from the region to fuel his mining operations.

Indeed he would have been the logical big player to make a move on Warrego, but he has a lot of balls in the air with the merger of fellow Perth Basin explorer Norwest as well as expanding his lithium interests.

In a remote town like Perth where billionaires fall in and out of favour with one another at alarming speed, the cordial relationship between Rinehart and Ellison has been one consistent. The MinRes founder worked with Rinehart in Port Hedland expansion. Ellison plays a long-term game and will find it useful to have an ally in the Perth Basin for his broader ambitions. The region is only just beginning to be recognised for its exploration potential and with close links to major pipelines giving it commercial prospects.

Ellison’s long game

The battle for Warrego is widely seen as a precursor to broader consolidation in the Perth Basin. As well as Strike and Beach, other players include Japan’s Mitsui and Ellison’s MinRes. Beach and Mitsui will be interested in the outcome to help steer the development of Erregulla.

But for Ellison, it will be wise to have Australia’s richest person in his corner.

In an investor briefing linked to the recent Norwest acquisition Ellison said he wants to bring as much downstream production from iron ore and lithium into Western Australia as he can. This will require access to long life energy sources. “That’s a way better investment for me over the next 40 or 50 years,” Ellison told the briefing last month.

Rinehart’s Hancock Energy is circling for its own reasons, it has an energy joint venture with Korea’s Posco following buyout of Senex that is exploring the potential of using gas as a feedstock for blue hydrogen production ahead of a longer term transition to green hydrogen.

The Erregulla field, tapped in 2019, is now moving through the approvals phase with the first production scheduled for 2024.

Strike was already on the back foot with the management of Warrego given a frosty relationship between the joint venture partners. Now with Rinehart set to secure victory the balance is significantly tilted against Strike which will be forced to deal with a cash-rich junior partner that is expected to drive them hard on Erregulla.

Norway’s Bega bite

The world’s biggest sovereign wealth fund, the $US1.5 trillion ($2.2 trillion) Norwegian oil fund has quietly emerged with a substantial stake in Barry Irvin’s dairy major Bega Group.

For years the fund has been lurking on the registry with an approximate 1.3 per cent stake, but has been increasing this in recent months.

It popped up with a 5 per cent stake on December 22 before dipping below the minimum disclosure threshold. It has returned with a 5.2 per cent stake worth $62m at current prices.

It’s getting crowded at the top of Bega, a year ago the mining billionaire Andrew Forrest became the biggest shareholder with a 10 per cent stake. Other major Bega investors include Perpetual and Fidelity.

Bega Group executive chairman Barry Irvin. Picture: Arsineh Houspian

It has been a tough year for Bega, with the dairy play squeezed by higher farm gate prices while pricing at the retail end has remained under pressure. After last year cracking the $3bn revenue mark, Bega has recently warned of “significant cost increases” for this financial year. Financial 2024 is expected to be better with the prospect of high farmgate prices pulling back.

The Norwegian wealth fund, operating under Norges Bank, is one the world’s biggest share market investors. The fund is financed by Norway’s oil and gas revenues, and has in recent years become more active around corporate governance and putting pressure on companies to move to net zero targets.

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Originally published as Billionaire Rinehart uses cash advantage in her bid for gas explorer Warrego