NSE borrowered heavily from Magnum to get the first drills done in US shale. The risk, as I saw it, for NSE was that those initial wells would come in below expectation (i.e. Magnum sold them dud land), leaving NSE unable to pay debts and making it a cheap takeover option for Magnum. Those initial NSE wells have now come in with good results, giving NSE sustainable cash flow going forward. Put simply, injecting equity in NSE for investment in AQO just become more expensive for Magnum. What this means is that it has become more attractive to take out AQO directly for Magnum.
Finally, when Drillsearch took out Acer energy in 2012 (another low ball offer), Senex took a 6% position and were considering a rival bid. Senex will not like Drillsearch getting so much land in the Northern cooper where Senex is also building a position. From memory, Senex has quite a pile of cash, so competitive concerns might see them put in a cash bid.
So there are two viable competitors for AQO as I see it.
I think the Drillsearch offer is well below fair value. Looking at recent price history as a baseline for valuing the stock is fundamentally flawed as some large holders have been capping the share price with large sells since the NSE/Magnum deal (Eye fund actually took out that block, if people recall).
Won't be giving up my shares, at least voluntarily. Have very little interest in Drillsearch. They don't even pay a dividend. The upside, for me, of AQO standing alone is much more attractive.
AQO Price at posting:
28.5¢ Sentiment: Buy Disclosure: Held
