I bought into AZA at around 1.10 as I considered the stock to be...

I bought into AZA at around 1.10 as I considered the stock to be undervalued relative to its 2P and 3P reserves. Unfortunately, as the market expects the takeover to be a don deal, our share price is tracking the implied value of the ROC offer.

Based on current price, ROC is effectively paying 270mn (0.792 of ROC's market cap fully diluted) + 19.5mn (5c for all outstanding shares/options) = 290mn. On a 2P basis (28.9MBO), ROC is effectively buying a barrel of 2P reserve from AZA at a little over AUD10. The standard takeover price for purchased 2P reserve used to be c.US8 when WTI spot was much cheaper. More recently, purchased 2P barrel is closer to aorund US20 (especially developed 2P reserve).

ROC's latest statement is saying that AZA's recent price slump indicates that the market believes it is fairly priced. But it is only faling as much as ROC because of the expectation that the takeover will succeed, and therefore, the price is simply tracking the ugly decline of ROC's share price.

As for KPMG's independent assessment, well, I guess the board must have paid them good fees. How else can they possibly derive at a fair value for AUD10 per barrel of 2P reserve? and this is without taking into account the huge 3P numbers that can be proved up with further drilling at BMG (especially condensate and gas reserve).

ROC, on the other hand, has had many years of trying to bump up their reserve, but their geologists have let them down with dry holes after dry holes. So they have used up their cashflow and at the same time, failed to replace those reserves. Now they want to buy our reserve at some ridiculous price, and the board recommends it?

ROC might have won the support of the majority of the board, but they ain't getting my share unless they get 90% acceptance and it becomes a compulsory acquisition.

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