Drillsearch Energy shares hit by low prices, management changes, UBS says
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Drillsearch Energy CEO Walter has to evaluate further growth opportunities outside of the Cooper Basin prepare a defence strategy 'in the event corporate approaches occur', UBS says. James Davies
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Will Willitts
UBS has a 'buy' rating on Drillsearch Energy (DLS) and a $0.80 target price.
UBS notes that Walter Simpson has completed a "rapid rise" as he has been appointed full time to be chief executive. He joined DLS in March from QGC (BG Group) as chief operating officer.
"We believe there are a number of tasks confronting Mr Simpson. These include: 1) complete refinancing discussions with lenders to ensure the company has access to sufficient liquidity to deal with its US$125m convertible bond (bondholders have a put option in September 2016); 2) ensure its FY16 capex commitments remain flexible enough to ensure DLS lives within its means (DLS is non-operator of most of its acreage, so any further downward revision in capex would require agreement with its JV partners); 3) evaluate further growth opportunities outside of the Cooper Basin, and; 4) prepare its defence strategy in the event corporate approaches occur.
"The DLS share price has been hit hard by a combination of sharply lower oil prices, the sudden departure of their previous CEO and the news that BPT's MD was away on indefinite leave. We see BPT as a logical acquirer of DLS ... so the news that BPT's Managing Director was unavailable may have been interpreted by the market that M&A was on hold. BPT confirmed this week that its MD had resigned from the company, but that "the executive team and staff are committed to delivering on the new strategy."
"We see this as a signal the company will continue evaluating M&A opportunities, potentially even prior to the appointment of a full time CEO. From a DLS perspective, Mr Simpson's remuneration package contains a provision that he is entitled to a 12-month payout in the event of any change of control (equivalent to $820,000); we don't view that as an impediment to a potential acquirer."
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D/SEARCH FPO (DLS)
$0.490.000.00%
volume 1645569value 821367.9
Last updated: Wed Sep 23 2015 - 6:29:56 am
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Company Profile
Exploration for development, production & marketing of oil & gas.
http://www.drillsearch.com.au/
Oil, Gas & Consumable Fuels (101020)
ASIC 006474844
