RobrobGood post. Going further with the possibilities.Part 1My...

Robrob

Good post. Going further with the possibilities.

Part 1
My guess is the only way BOW will reject Arrow's bid outright is if they have a significant upstream JV partner close to signing up. That's a pretty big if.

As part of the agreement, the JV partner injects capital at a premium to the pre-takeover price but below Arrow's bid price. It also buy's a percentage interest in BOW's tenements. This is a bit similar to Shell's inital tie up with Arrow.

Given that the JV partner would be going up against Shell & Petrochina, the JV partner would have to have deep pockets, the intention of securing gas supply for their own LNG offtake and intestinal fortitude.

Such a deal would hold the share price up for a while.

The other question is, how would Arrow react to this?

Maybe Arrow would then take the deal to shareholders at a premium to the BOW's market price once it settles down from the post JV partner announcement.

As I've said in another post, I'd much prefer BOW's board to have immediately rejected the offer as too low and commence the horse trading from that point.

What was the risk of BOW rejecting the offer?

Part 2

If the above seems far fetched, this is more so.

If I was an LNG buyer looking for off-take from QLD CSG, I'd much prefer to enter the fray with a significant interest in relative immature upstream assets.

We all consider the offer too low given the potential of BOW's tenements. I think investors in BOW would be assuming multiples of the current value if BOW could see its way through to production in 2015 with a JV partner.

If an upstream JV partner were to pay a price of say $2.00 as share for equity in BOW it doesn't seem too steep a risk for them if the reserves can be proven up.

The upstream JV partner invests in the development of BOW's acreage and potentially turns their $2 into $4.

Leverage in negotiations for off-take with downstream LNG proponents would be significantly increased. The increased value of the upstream assets goes along way to pay for downstream equity and mitigates the financial risk associated with downstream development.

Hoping for an upstream JV partner to appear out of the blue.