S/h should be able to access a copy from the Edison website, but...

S/h should be able to access a copy from the Edison website, but at this point it does not seem to be up there.
The earlier report is there.
http://www.edisoninvestmentresearch.com/search/WestSide%20Corporation

here are some extracts.
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--- WestSide Corporation is a research client of Edison Investment Research Limited --

WestSide Corporation
Initiation of coverage
Value investment, but all eyes on June

WestSide, focused on Queensland coal seam gas (CSG), is uniquely positioned as a small company to add real value to shareholders. Significant reserves, production growth and a new 20-year binding gas sales agreement, with oil-linked pricing from 2016, provide it with ample security and flexibility to deliver shareholder value. A recent unsolicited bid from China-based Landbridge has closed the valuation gap to our core NAV, although we continue to see considerable upside for shareholders through reserves growth and a favourable commercial market.

Flexibility and security secured
The new management team has in a very short space of time positioned WestSide for genuine growth and value generation. For a company of its size, the security provided to shareholders through significant net 2P reserves of 347PJ (c 364bcf), 3P reserves twice that number and current production of 12TJ/day places WestSide on a firm footing. However, this is complemented by a new 20-year gas sales agreement (GSA), which commences in 2015 to supply up to 65TJ/day to the Gladstone LNG facility; from 2016 prices will be on an oil price-linked contract. In addition, expansion of production to 30TJ/day requires no infrastructure upgrade and at A$2m/TJ thereafter is eminently affordable given predicted free cash flows

Landbridge Energy bid closes valuation gap
The main issue overshadowing the company at present is the unsolicited A$0.40/share (A$177.6m) offer tabled by Landbridge, a subsidiary of a private Chinese corporation. The bid is valid until 24 June 2014 and the group currently holds a 19.99% interest in WestSide. WestSide has issued a target statement urging shareholders to ignore and not accept the bid.

Valuation: Clear upside through growth and pricing
With ample reserves and a new GSA, which starts in 2015 and is oil price-linked from 2016, the recently (2013) installed management team has shown how to begin to unlock value. WestSide has the luxury of dictating development scale and pace and can cherry-pick the best funding options. The recent Landbridge bid has closed the gap on our very conservative core NAV of A$0.42 based on 2P reserves and US$80 oil. However, there is considerable upside to this from upgrading 3P reserves and resources. Our conservatively priced RENAV of A$0.61 reflects the start of this. With our models indicating a key sensitivity to commodity pricing (Exhibit 7), this valuation could increase markedly, especially given the captive market WestSide has available to it across the Gladstone LNG operators; for example at US$100 oil and a 10% discount our RENAV would be A$1.01.

Investment summary
WestSide: Value is road mapped
WestSide is exclusively focused on developing coal seam gas in Queensland Australia, with its main focus a 51%-operated interest in the Meridian SeamGas project. WestSide is currently under an unsolicited bid approach from Landbridge Energy Australia, a subsidiary of a private Chinese corporation. It has tabled a bid of A$0.40/share (A$177.6m) and currently holds 19.99%.

Valuation: 2P reserves development
WestSide is in a unique situation, in which it is able to provide shareholders with a clear strategy to value through the monetisation of significant 2P reserves. As of December 2012 there were 347PJ (c 364bcf) of net 2P reserves to Meridian and the company has just signed a binding 20-year GSA for up to 65TJ/day of gas. Existing facilities require no capital upgrade up to 30TJ/day and expansion is at a reasonable A$2m/TJ gross.

We arrive at a core NAV of A$0.42/share utilising US$80/bbl oil, escalating at 2% pa and very conservative well performance; future oil prices are the key to which the GSA is linked. With extensive possible reserves on Meridian, plus 3P reserves on other nearby assets, the upside potential is extensive. Our RENAV is A$0.61/share, rising to A$1.01 at US$100/bbl oil.

Financials: WestSide has flexibility
At 65TJ/day, there are over four years of proven reserves alone and nine years if WestSide undertakes no facilities expansion at all. As such, WestSide is in an enviable position for a company of its size in having a range of options for funding development such that gas to market time is minimised and shareholder value maximised. We have assumed the injection of A$30m of debt in 2015, but the timing, cost and size of any facility is purely theoretical at this stage.

Current cash is A$23.5m (31 March) and West Side concluded a A$3.5m rig sale in early March; currently the company is debt free. The six wells planned for the remainder of 2014 are funded from these reserves and future development speed is determined by financing, but full ramp-up is not expected until well into 2015, as the oil-linked contract does not become effective until 2016.
As things currently stand, we do not consider that shareholders will be asked to provide equity capital given the flexibility with which WestSide can develop the reserves. The GSA provides ample opportunity for WestSide to dictate terms on funding options and given management performance to date we would assume this is maximising shareholder return for the lowest cost of capital available.

Sensitivities: Unsolicited bid is the main element
The Landbridge Energy Australia offer is currently the most pressing issue and the company, a subsidiary of a private Chinese consortium, has tabled an offer of A$0.4/share valid until 24 June 2014 and currently holds 19.99% of the outstanding share capital. This unsolicited bid has prompted WestSide’s management to issue a comprehensive target statement document calling on shareholders to reject the bid. Other issues include the tendency for Australian governments to utilise the resource industry as a ready means of satisfying fiscal gaps; while recent changes do not affect WestSide, the situation needs to be monitored. In addition, increasing environmental awareness among land owners needs to be monitored as it may have implications for rates of development and thus hold implications for shareholder value realisation.

Apart from this bid, it is worth noting that in our opinion, if the Landbridge bid is unsuccessful, we consider that WestSide remains a takeover target as the size of the reserve base would be attractive to either players in the Queensland CSG area or new entrants.

Focused approach: Immediate value
WestSide is in a unique position as a junior oil company in that it has an excellent production base, extensive 2P reserves and a new long-term offtake agreement that will permit a wide range of development scenarios. There is excellent upside, which is not reliant on exploration success, but on lower-risk development drilling.

Coal seam gas: Focused location; huge potential
WestSide holds interests across a number of coal seam gas assets in the Bowen basin, located in Queensland. Although it encompasses 12,000km2, the main focus is the Meridian SeamGas project, a coal seam gas project located 160km west of the city of Gladstone.
Exhibit 1: Location of assets
Source: Westside

Gas sales agreement
Since mid-2013, WestSide has undergone senior management changes that have really pushed the company forward and placed it in an excellent position to add real shareholder value. Central to this is a new 20-year GSA, which was signed in March 2014 and becomes effective in 2015. The GSA is with the Gladstone LNG facility, a joint venture comprising Santos, Petronas, Total and KOGAS.
The new GSA provides excellent securitisation and presents the company with a variety of routes to develop the field either quickly or at a steadier state, depending on the cost of finance, but the need to utilise equity markets for funding is greatly diminished by this contract.

The current GSA expires at the end of 2014 and has been replaced by a new binding 20-year contract to supply up to 65TJ/day to the Gladstone LNG (GLNG) facility from 2015, whereby GLNG is required to take or pay all gas up to 65TJ/day and has first refusal on any additional supply.
The GSA is based on a Japan Customs-cleared oil-linked formula, which commences in 2016 and is approximately three times greater than the current pricing contract of a c A$2.8/mcf. The effect of the contract from 2017 is laid out below.

Under the new contract the current 12TJ/day production yields A$21m in net revenue to the company. To produce at the maximum take or pay contract limit of 65TJ/day, WestSide would need to invest net capex of c A$35-40m, but would attain A$112m of net revenue pa. WestSide estimates long-term operating costs to be A$2/GJ (A$2/mcf).

The revenue, and ultimately shareholder value, are very much aligned and proportional to future oil prices. As part of our valuation we show the potential upside from stronger oil prices.

Development
As of 31 March 2014 the company had no debt, cash of A$23.5m and on 1 May 2014 sold a drilling rig for A$3.5m. The 2014 drilling programme, the drilling of six new wells, will be funded from these cash reserves.

As highlighted above, the revenue from the old GSA is one-third of the new contract value and as such WestSide has a programme to redevelop existing wells alongside drilling new wells to minimise capital expenditure and maximise netbacks until the new contract kicks in.

Wider, longer-term, development is focused on central and eastern fairways in the asset, where long-term producing wells are located and where several hundred wells can be easily placed and produced from at reasonable development risk. A western fairway has been subject to pilot programmes on deeper (1,350m) seams and offers huge potential upside as 2P reserves are restricted to above 800m and subsequent possible reserves have been calculated as 10% of the potential gas in place of these deeper seams.

As such there is a defined mechanism to get 3P into 2P/1P reserves in time, but which also vastly increase the quantity of 3P reserves.

Exploration upside
While the Meridian project is the core focal point of the portfolio, the Paranui (ATP 769P), Tilbrook and Mount Saint Martin projects (ATP 688P) have 3P reserves already, which can be translated into 2P reserves and production through appraisal work. All the projects lie near existing infrastructure (namely the Meridian project) and offer offtake to both domestic market and LNG terminals. The Paranui project is probably the most developed of the upside projects including pilot production.

Landbridge offer
The company is in receipt of an unsolicited bid from Landbridge Energy to acquire WestSide’s share capital for A$0.4 per share, totalling A$177.6m with the offer period ending on 24 June 2014.

On 6 May, WestSide communicated with shareholders asking them not to accept this offer as it falls short on a number of fronts, including not providing fair value to the company’s reserves, the long-term oil-linked contract nor the exploration upside. There are a number of scenarios that could play out over the coming weeks, but in summary Landbridge needs to acquire at least 51% of the outstanding share capital to have any major influence over the company. At the extreme end, if it attains 90% it has the right to acquire all the shares, while if it attains between 51% and 90% it will have majority control and thus effectively control the destiny of the company, which will have repercussions, not just for value and liquidity, for shareholders. However, one thing for shareholders to be mindful of is that, according to the bidder’s statement, Landbridge has secured financing from a Chinese bank to fund up to 50% of the acquisition cost.

If Landbridge does not attain 51% it will still hold a large interest in WestSide and if it retains its holding, it could mount further bids for the company, thereby distracting management from running the company. If on the other hand it is not successful and decides to sell its current holdinholding, it could create a drop in price as it sells its stock, potentially creating another takeout opportunity as the price dips with the increased stock in the market.
Landbridge currently holds 19.99% of WestSide.

Management
Over the last 12 months the company has undergone a series of changes at the top level.

In September 2013, Mike Hughes was appointed CEO and in October 2013, Robert Neale was appointed chairman. Mike has significant experience and project development expertise and was instrumental in building Hess Corporation’s South-East Asian operations. He was more recently gas supply director for GLNG and has significant experience in CSG development and the East Coast gas and LNG markets.

The management team was further bolstered by the appointment of Bryan O’Donnell, an experienced development manager, in January 2014 to lead the Meridian gas field expansion.

Since these appointments the company has undertaken a production review, increasing production by 30% between May and September 2013 thorough development and appraisal reviews, as well as securing the new 20-year GSA.
Management has achieved a tremendous amount in a short time and enabled shareholders to identify a clear path to value creation. While currently occupied in defending the unsolicited approach by Landbridge, we consider management’s next challenge to be securing suitable finance to undertake development in a fashion that maximises shareholder returns at a minimal cost of capital. Given the flexibility offered in the GSA and asset, we do not consider equity placement as one of these options.

Sensitivities
The key risk to WestSide crystallising value for shareholders currently is the unsolicited bid from Landbridge Australia Pty, which currently holds 19.99% of the company with an offer deadline of 24 June to achieve the necessary shares to acquire all the outstanding share capital of WestSide. Although we do not discuss the full implications of a failed bid here, various scenarios could play out depending on the holding as of 24 June. Landbridge is a subsidiary of LGC, a Chinese private industrial conglomerate with US$815m of net assets and cash reserves of US$133m according to the bidder’s statement.

If the bid is rejected by WestSide shareholders as management has requested, and the minimum request for majority control (51%) is not achieved, two scenarios could unfold creating near-term uncertainty and volatility. Firstly, Landbridge could remain a large shareholder and as such could continue to present unsolicited bids to gain control of the company, thereby taking up huge quantities of management time to defend the bids, or alternatively Landbridge could sell its holding into the market creating downwards pressure on the share price.

It is worth highlighting that the bidder’s statement notes that the Industrial and Commercial Bank of China (ICBC) will provide a financing facility of up to A$98m, or 50% of the offer amount, whichever is lower, depending on shareholder uptake in the unsolicited offer.

The only other significant factors that could restrict the speed of development are changes to environmental legislation and continued changes to the fiscal regime. Oil and gas is responsible for 30% of Australian private sector investment (source: www.appea.com.au) and while the changes, mostly affecting treatment of cash farm-ins, do not directly affect WestSide, they highlight the potential longer-term risk to project economics.

In addition environmental concerns closely follow CSG development and are principally focused on water resource use and disposal for drilling and de-watering the coal seams, conflicts with other land use, namely agriculture, and non-specific health issues around developments. All development oil and gas companies need to be mindful of public opinion and while CSG remains a significant
source of energy, companies need to respect environmental and social concerns and ensure they do not become major factors in delaying and curtailing development.

There is one issue surrounding the current GSA and a potential legal wrangle over whether WestSide will be able to supply all gas to the Gladstone LNG facility in 2015 due to termination rights of the existing GSA to AGL. Consequently, the JV may be obliged to supply 14.4TJ/day to AGL for 2015 at the lower rates. However, as the field development plan predicts larger production than this and the oil-linked price does not commence until 2016, we view this as a minor issue in light of the bid and future cash flow, and even a worst case scenario with, say, production delayed to 2016, has minimal consequences. The movement of 3P to 2P reserves on Meridian will be dictated by the pilot projects on the deeper seams on the Western fairway and as they are located in other areas of the field away from declared 2P reserves, it is worth highlighting that 2P reserves could increase markedly once pilot production and geological review have been undertaken and could provide additional value driving newsflow independent of production rates and production drilling.

Valuation
As previously noted, for a small company WestSide has an excellent opportunity to deliver shareholder value given its position of holding significant reserves, low-risk production and a long-term offtake contract.
Assumptions: Basis for the valuation

We use a cash flow analysis, discounted at 10%, to arrive at a core value for WestSide. We assume very conservative performance for the wells with initial production of 400mscf/day (expected range 300-500mscf/day) and declines at 15% pa. The cost of the wells is assumed at the highest company estimate of US$1.5m, which we also assume allows for abandonment; opex is assumed at US$2.0/mscf. Single-well EUR is just under 0.9bcf.

We have assumed sales prices in 2014 of US$2.8/mscf and US$5.7/mscf in 2015 as per Exhibit 5 and linked to our derived oil price assumptions, as shown in Exhibit 7. We have run two DCFs, the first developed so that a production peak near 65TJ/day is maintained; as this equates to the maximum declared offtake of the new GSA we have not increased production further. We have then produced the balance of the 2P reserves, commencing in 2017 on the assumption that a further offtake agreement is signed, risking this 80% ahead of any further agreement being signed.

We have undertaken a range of sensitivity analyses to see how the NPV of the Meridian project changes with respect to firmer or softer oil prices. While the exact terms of the GSA remain confidential, we make assumptions to the effect that the price per GJ is proportional to a rise in oil price. For US$80 oil and a 10% discount we have a A$0.61/share RENAV retaining the conservative well performance. At US$100 and 10% this would be A$1.01.

Exploration upside: Yet more gas
WestSide is freely able to produce greater than 65TJ/day and sell to alternate markets as well as the Gladstone LNG facility. We have not given too much consideration to maximising production as quickly as possible in our model given the GSA oil price contract does not kick in until 2016 and timely development provides ample capacity with the 2P reserves; however, it does cause a near-term skew in the DCF analysis until the full oil price linking kicks in.

The very large possible reserves could be moved in a reasonable time frame (three to five years) by ongoing geological work and pilot production on the western fairway of the Meridian project where the possible reserves are mostly located. The pace and success of this work will determine how quickly they can be moved into 2P reserves, are independent of the production rates on the other areas and, given the headroom in the GSA to supply up to 65TJ/day (currently 53TJ/day above current production), we do not see any issue in monetising additional reserves but have adopted a conservative approach to our valuation.

The 2P reserves alone would make a convincing story. However, the fact that 3P reserves, having been conservatively assessed, are over twice the 2P reserves on Meridian alone gives shareholders significant upside value potential. While the value of the 3P reserves needs to take into consideration development risk and the appropriate allocation of funding, which we consider should be achievable through the free cash flow generated from the development of the Meridian Westside
2P reserves, the main variable in determining the contribution of the value of these reserves to current value is that of time.

As such taking into consideration the possible reserves (3P-2P) of 538PJ (430PJ of which are on the Meridian project) in isolation and ascribing a value of US$0.25/mcf for these reserves with a chance of success of 60% on their development, we arrive at risked exploration NAV (RENAV) of A$0.61/share and run sensitivities as shown in Exhibit 7 showing that substantial upside can be offered in a higher oil price environment. In addition the conservative assumptions we have made on well performance can be revisited once development is underway and tighter tolerances on well performance envelope are shown.

Financials
WestSide had cash of A$23.5m and no debt as of 31 March 2014 and on 1 May sold a drilling rig for A$3.5m. It has six wells to drill in 2014 and limited additional commitments. The company will not rush into development, as the current GSA, with its low gas sales price of c A$2.8/mcf, leads to an overall loss.

WestSide has the ability to phase development such that no additional funds need to be raised.

However, that would not deliver maximum or timely value for shareholders as reserves are worth more produced. As such, the exceptional 2P reserve base and the 20-year JCC oil price-linked GSA (from 2016) permits management the luxury of determining the route to value creation that maximises shareholder value while minimising the cost of capital.

We have assumed the issue of A$30m in debt in late 2015 to fund development according to our development profile, although we note the issue of any debt will be determined by analysis of a large number of development scenarios by the company and the speed at which it wants to develop the field and the 2P reserves.