Texas-focussed takeover bid initially greeted with rejection

WA-based Eureka Energy has urged shareholders to reject a $107 million takeover offer by fellow Texas-focussed shale gas explorer Aurora Oil and Gas. In a release to shareholders in early May, the Eureka board stated the offer received from Aurora was “opportunistic”and undervalued the company; Auroracurrently holds 2.9 per cent of Eureka, and offered Eureka shareholders $0.45 cash per share – a 36 per cent increase on Eureka’s last trading price prior to the
announcement.
“The offer is lower than the conservative 3P valuation of approximately US$0.56 per share placed on Eureka’s flagship asset…,” Eureka stated.
The unconditional, on-market cash offer is set to close on June 15. In a report released through Euroz, Aurora said that accepting the offer would give Eureka shareholders “certainty provided by receiving cash at an attractive price.”
The report also highlighted Eureka’s “uncertain earning profile,” with plans to remove the company’s proposed US$50 million debt facility.
Eureka is a Perth-based, ASX-listed company with three core assets focussed within a combined 6742 acres in the Eagle Ford trend, onshore Texas in the US. Aurora is an ASX and Toronto exchange-listed oil and gas company active exclusively in the over pressured liquids-rich region of the Eagle Ford Shale.
Acquiring Eureka would enable Aurora to increase its stake on the Eagle Ford Shale, which totals about 76,000 acres and contains the prolific Sugarkane field. It is one of the most active oil and gas regions in the US, home to projects worth more than
US$26 billion since 2010; 260 rigs are currently operational in the trend. With the lowest gas prices in a decade in the US, many small to mid-sized US companies with debt and gas dominated portfolios are capital constrained, presenting attractive opportunities to expand Eagle Ford interests.
If its takeover of Eureka is successful, Aurora will increase its stake in four areas of mutual interest in the Sugarkane field: Sugarloaf, which Aurora’s stake in would increase to 22.05 per cent; Longhorn, which it would hold 31.9 per cent in if successful; and Ipanema and Excelsior, which it would hold 36.4 per cent and 9.1 per cent in respectively if successful.

 

By Josh Del Pino

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