Beach Energy nabs Warrego Energy in $250 million takeover
Warrego Energy’s board recommends shareholders vote in favour of Beach Energy’s offer, which has outshone last week’s merger proposal by Strike Energy.
Beach Energy (ASX: BPT) has come out the winner in a takeover battle with fellow gas player Strike Energy (ASX: STX) by luring Warrego Energy (ASX: WGO) with a $246 million offer.
Beach, the bigger of the two bidders, today announced it has inked a scheme implementation deed to acquire all of Warrego’s issued shares for $0.20 cash per share, plus any net proceeds received from the sale of Warrego’s Spanish assets, by way of a scheme of arrangement.
The share consideration represents a 36% premium to Warrego’s one-month volume weighted average price (VWAP) to 9 November.
Beach’s offer overrides the merger proposal made by Warrego’s joint venture partner Strike last week of 0.775 new Strike shares for each Warrego share held and a contingent scheme consideration if Warrego’s Spanish assets were sold within 12 months. Under that deal, Warrego shareholders would have owned about 30.5% of the combined group.
Strike and Warrego, which share the West Erregulla onshore gas project in the Perth Basin, have held merger talks on and off for years before Beach swooped in with its attractive offer.
Warrego board in favour of the deal
Warrego’s board has unanimously recommended that its shareholders vote in favour of Beach’s scheme, in the absence of a superior proposal and subject to an independent expert’s confirmation that it is in the best interests of Warrego shareholders.
In a statement today, Warrego managing director and chief executive Dennis Donald said the transaction provides an attractive outcome for the company’s shareholders, with the certainty of cash proceeds.
“The premium offered to our share price recognises the strong underlying value of our assets as well as providing the ability to realise further upside from the future potential sale of Warrego’s assets in Spain,” he said.
In a separate statement, Beach chief executive Morné Engelbrecht called the company’s cash offer “compelling value” for Warrego shareholders and believes it provides Beach with complementary acreage in the Perth Basin.
“Warrego’s exciting Perth Basin gas acreage represents an additional development opportunity for new gas supply beyond Beach’s Waitsia stage two project and our gas exploration drilling which will soon commence,” he said.
The company also noted its ability to use its “strong balance sheet and proven development expertise” to provide further support not only for the transaction but future gas developments in the Perth Basin.
The scheme is subject to approval by Warrego shareholders and by the court, as well as other customary conditions.
Warrego’s assets
Warrego holds two onshore assets in Western Australia, EP469 in the Perth Basin (in a 50:50 joint venture with Strike) and exploration permit application EPA-0127 in the North Perth Basin.
EP469 covers the West Erregulla gas field which was recently estimated to hold 422 petajoules of 2P sales gas and a gross 2C contingent resource of 30PJ.
Design work for an additional production well (WE-6) began last quarter in anticipation of drilling prior to first gas, which is estimated to be in 2024.
An updated conventional work program for the company’s application area was recently approved and Warrego had been finalising an accelerated exploration work program with its future joint venture partner Mitsui including evaluating the potential for carbon capture and storage projects.
Warrego’s Spanish assets include the El Romeral (which included an integrated gas production and power station operation) and Tesorillo prospects held under a joint venture with UK-based Prospex Oil and Gas.