China Targets Australian AWE

China Energy Reserve and Chemical Group has made a takeover bid for Australian upstream oil and gas focused AWE, the target said November 30. The unsolicited, non-binding, indicative and conditional proposal is to acquire 100% of the shares in AWE at a price of A$0.71 each.

AWE’s share price closed November 29 at A$0.545 and opened November 30 at A$0.657. AWE said the proposal “is not sufficiently attractive to provide access to due diligence.”

RBC Capital Markets analyst Ben Wilson said: “We concur with the AWE board’s assessment. We recently upgraded our AWE risked discounted cash flow valuation [roughly] A$0.91/shr (A$1.13/shr unrisked).”

Wilson said that CERCG appears to be a private Chinese state controlled oil and gas trading, logistics and distribution company with CNPC (Petrochina parent) and various Chinese government organisations being its largest beneficial shareholders.

“While any bid from a company associated with CNPC must be taken seriously, we think bid pricing needs to be higher to engage the board and major shareholders,” he said.

AWE’s priorities centre on the development of Stage 2 of the Waitsia gas project in Western Australia and securing new gas sales contracts for Casino and BassGas on the east coast at substantially higher prices, AWE says on its website.

CERCG said it recognises the “good work” on the Waitsia project. 

Nathan Richardson