Shares in oil and gas company AWE Limited (ASX: AWE) have risen 21% to $0.66C a share in today's session following the company's announcement that it has received a takeover bid from a subsidiary of China Energy Reserve and Chemical Group (CERCG) to acquire 100% of the company's shares on a fully diluted basis at $0.71 cash per share.
CERCG is a Chinese state-owned entity that operates in oil and gas trading, logistics and supply services in China. The proposed bid values the company at approximately $430 million and a 30% premium to yesterday's closing price. The CERCG proposal is subject to a number of conditions such as completing the necessary due diligence and obtaining approval from the Foreign Investment Review Board.
Waitsia field
The takeover bid follows a recent independent review by RISC which increased the 2P reserves of the company's highly promising Waitsia gas field in Western Australia by 78%.
The Waitsia field is believed to be the largest onshore conventional gas discovery in Australia in the last 40 years. AWE is the operator of the field with a 50% ownership stake, while the remaining 50% is owned by Lattice Energy, which was recently acquired by Beach Energy Ltd (ASX: BPT).
The Waitsia gas field could supply approximately 10% of Western Australia's domestic gas needs for at least 10 years. Construction is planned to commence in the 3rd quarter of 2018 with the first gas sales projected to be in 2020. Last week's announcement that the Waitsia-4 field has produced the highest flow rate to date from the Waitsia field and one of the highest ever recorded onshore in Australia is also encouraging.
A higher bid?
The significance of the Waitsia reserves upgrade along with recent bullishness in the oil price has propelled the stock from the mid $0.40c level since late October.
Institutional investors are also bullish with the recent institutional placement that raised approximately $38 million at $0.50c a share being significantly oversubscribed. The initial reaction of AWE's board regarding the proposed takeover bid has been that $0.71c a share is not sufficiently attractive to provide access for due diligence.
