UPDATE: Westside To Buy Queensland State Coal Seam Gas Asset
December 29 2009 - 9:08PM
Dow Jones News
Little known Westside Corp. Ltd. (WCL.AU) on Wednesday signaled
its intention to become a more serious player in Queensland state's
booming coal seam gas, or CSG, sector by announcing it has agreed
to spend up to A$80 million buying acreage from Anglo American PLC
(AAUKY) and Mitsui & Co. Ltd. (MITSY).
The Brisbane-based company, which already explores for CSG in
several permits in Queensland's Bowen Basin, said the proposed deal
could make it the state's second biggest listed pure-play CSG
company.
Over A$20 billion has been spent on mergers and acquisitions
over the past two years in Queensland's CSG sector as
multinationals turn to alternative sources of fuel as traditional
supply declines.
Gas demand in Asia is projected to increase sharply, especially
in densely populated China and India, and Queensland is ideally
positioned to serve the regional market through liquefied natural
gas, or LNG, plants built on its northern coast.
Westside said it has signed a conditional agreement to acquire
Anglo American's stake in the Dawson Seamgas CSG assets and may
also buy Mitsui's stake in the assets subject to the consideration
of preemptive rights.
The deal would result in Westside taking a stake of up to 100%
in the producing Dawson Seamgas CSG fields, near Moura in
Queensland's Bowen Basin, and up to 50% in two adjoining
permits.
It would acquire up to 212 petajoules of proven and probable
reserves and 514 petajoules of proven, probable and possible
reserves.
"Westside's total acquisition cost is expected to be between
A$55 million and A$80 million, depending on the ultimate ownership
interest acquired, with a proportional reduction of Westside's
investment if Westside seeks to work with a joint venture partner,"
the company said in a statement.
The size of the acquisition is surprising considering that even
the bottom end of the expected price tag is higher than Westside's
market capitalization before the deal was announced.
Westside intends to issue new shares to existing shareholders to
help fund the transaction but won't provide more details until
there's further certainty on how much it will need to raise.
The resolution of various preemptive rights could take up to 90
days, Westside said.
Shareholders looking for another opportunity to buy into
Queensland's CSG sector pushed Westside's shares higher. At 0140
GMT, they are up 4 cents, or 8.3%, at 52 cents after rising as high
as 56.5 cents.
"The proposed investment has the potential to transform Westside
from an explorer only business to a significant CSG producer, with
sales contracts in place and a portfolio of exploration projects in
various stages of development," Chairman Angus Karoll said.
The assets Westside has agreed to buy are adjacent to its
existing Paranui CSG project and currently produce about 12
terajoules of gas per day for the domestic market.
They are also adjacent to the proposed route for the Surat to
Gladstone pipeline. The port city of Gladstone is the proposed home
of up to five LNG projects.
-By Ross Kelly, Dow Jones Newswires; 61-2-8272-4692;
ross.kelly@dowjones.com
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