I have a number of comments on the target statement and I am...

I have a number of comments on the target statement and I am wondering why nobody has yet commented on the fundamental error in the statement.

I really don't care what happens with ADI - it is a lose/lose situation for ADI shareholders no matter if the T/O offer goes ahead or fails.

If it goes ahead then ADI shareholders miss out on obtaining a FAIR PRICE for their shares. If it fails the market price may fall or given the AWE shareholding, never adjust to reflect the true value of the shares.

For AUT the situation is quite different. If the ADI T/O goes ahead it establishes a base price for the assets and AUT will adjust upwards to any increase in the T/O offer.

If the T/O fails then AUT has additional momentum from the additional wells in the area.

IMO EKA is a lost cause if the T/O fails as the company is too small to really be in any ones interest other than the two other JV partners. Any 'premium' built into the share price because of the T/O offer will probably fall slowly away.

Regarding the Target statement - why it is fundamentally flawed.

I am wondering why ADI even bothered to spend good shareholder money on the statement. It fails for a number of reasons and would fail to address many of my concerns if I still held ADI shares. As the statement will impact the other two joint venture partners, I am concerned about the fundamental error in the statement.

(I am still wondering why not one person has commented on this one aspect of the statement. IMO it is the most important aspect of the statement and has the most impact on the numbers in the statement.)

As a result of this fundamental error, IMO ADI shareholders have been 'sold down the river' should AWE come up with an offer of 61 cents which was determined to be "FAIR MARKET VALUE". Should that amount be offered the ADI BOD has no recourse to come back and say that the offer is too low.

I previously posted that I thought the number that would be offered as a value in the target statement would be $1.00. I maintain that due to the fundamental error in the report that the number should have been close to that $1.00 and not the 61 cents as given. The worst and best case scenarios have nothing to to with this number at all. Incorporating the correct type of analysis would result in those numbers increasing as well.

IMO those that wrote the report had better bone up on how to undertake the analysis needed for this type of situation and others as well as they have not commented on this at all.

As a result of this fundamental error, I wonder what the instructions that were given to the people conducting the analysis used for the target statement.

Can anyone figure out what this 'fundamental error' is? I am amazed that those that put together the report were unable to report this number although one brief sentence in the statement alluded to it.......

Here goes:

Shareholders are not interested in the "FAIR MARKET VALUE" of ADI shares. Shareholders are interested in finding out what another party would pay for the shares as a result of the entity losing its identity and being taken off the market. This is the "FAIR VALUE" of ADI shares.

As such the entity losing its identity (in this case ADI) ceases to exist in the market and becomes part of other entity. Once this happens the cost of capital for that separate identity ceases to have any meaning at all and the cost of capital for the 'deceased entity' now becomes the cost of capital for the acquiring entity - in this case AWE.

The cost of capital used in the target statement was around 15% and this was used to discount the values to come up with the 61 cent per share "FAIR MARKET VALUE". IMO this is errorneous and the correct figure that should have been used is the weighted average cost of capital to AWE.

As ADI would cease to exist as a stand alone company, any capital raised would be done under the umbrella of AWE.

Had the correct cost of capital been applied to the calculations the "FAIR VALUE" of the ceasing to exist ADI would be around the $1.00 area.

In conclusion, IMO the target statement seriously undervalues ADI and more importantly the value of the JV assets by applying an incorrect cost of capital to determine an inappropriate value of ADI shares - the "FAIR MARKET VALUE". What shareholders needed to be told was the "FAIR VALUE" of ADI shares.

As such I have taken advantage of the increase in the value of EKA shares and switched into AUT - also taking advantage of those selling off their shares.