Vintage Energy to acquire Galilee Energy in strategic merger for east coast gas expansion
Conventional gas developer Vintage Energy (ASX: VEN) has moved to take over Queensland coal seam gas specialist Galilee Energy (ASX: GLL).
The two companies have entered into a binding heads of agreement (HoA) under which Vintage will acquire all of the fully paid ordinary shares in Galilee by way of a scheme of arrangement.
The merged entity will feature Vintage’s growing South Australian and Queensland conventional gas projects alongside Galilee’s Queensland coal seam gas developments and its substantial contingent resource of more than 2,500 petajoules.
Enhanced portfolio
The two companies believe the merger will create greater financial strength, an expanded resource base and an enhanced portfolio focused on supporting the growing gas requirements for Australia’s east coast.
“The merger will create a company with much greater exposure to east coast gas supply in the near and long term and a stronger balance sheet,” Vintage chair Reg Nelson said.
“For Vintage shareholders, it means their company will be better equipped to grow production and revenue from the appraisal of the Odin and Vali gas fields.”
“In addition, our long-term prospects will be enhanced through the addition of Galilee’s substantial gas resources.”
“Their combination will result in a portfolio encompassing nearly all of the onshore sedimentary basins currently supplying, or expected to supply, gas to eastern Australia such as the Cooper, Bowen, Surat, Otway and Bonaparte Basins.”
Galilee board backing
The board of Galilee has stated that it intends to unanimously recommend the company’s shareholders vote in favour of the scheme.
Galilee’s executive chair Ray Shorrocks said the proposed merger comes at a time when there is a huge opportunity emerging in Australia’s east coast gas market.
“This merger is aimed at enabling the combined companies and their shareholders to take full advantage of this looming gas shortfall and the impact that will have on gas prices, margins and free cash flow generation.
“It will also provide long-term growth potential and access to funding.”
Proposed terms
The merger is conditional upon Galilee completing a $2.5 million capital raising announced today.
Under the HoA proposal, Galilee shareholders will receive two fully paid ordinary shares in Vintage for every fully paid ordinary Galilee share held on the scheme record date.
The consideration implies a share price of $0.02 for Galilee based on the closing price of Vintage shares of $0.01 on 12 August 2024, the last day both companies traded prior to Galilee entering a trading halt.
Upon implementation of the scheme, Vintage and Galilee shareholders will hold approximately 60.2% and 39.8% of the merged group respectively, calculated using Galilee shares on issue post-capital raising.