Beach tipped to be the focus of merger activity in Cooper Basin
PAUL GARVEY | The Australian | January 06, 2014 12:00AM
SOUTH Australia's Cooper Basin is shaping up as a hotbed of merger and acquisition activity this year, with bankers tipping a frenzy of consolidation as international interest in the region's shale potential takes off.
Adelaide-based Beach Energy is being touted as a likely key player in the reshaping of the Cooper Basin ownership structure, with a number of investment bankers tipping Beach to be both a potential acquirer and a takeover target in the year ahead.
More than 40 years after it started producing oil and gas, the Cooper Basin is enjoying a renaissance on the back of its so-called unconventional gas potential.
Only a handful of years ago, the Cooper Basin was written off as a mature oil and gas province past its prime. But the basin has been identified by international experts in recent years as one of the most promising regions in the world for shale gas, with advances in drilling and fracturing techniques set to open up vast new sources of supply.
Investment bankers told The Australian that Beach Energy looked almost certain to make a significant acquisition this year, which could be the group's last full year under long-serving chief executive Reg Nelson.
There has been widespread speculation about Beach's potential takeover activities since the group locked away a $320 million debt facility last July.
Beach has since emerged as a buyer of shares in Drillsearch Energy, where it has built up a 4.9 per cent interest. It also now owns 18.4 per cent of Cooper Energy. Cooper Energy's managing director is Hector Gordon, a former Beach chief operating officer.
One banker who has worked closely with the oil and gas sector said he believed Mr Nelson wanted one more big deal under his belt before his retirement, which could come in mid-2015.
Beach previously tried to take over Drillsearch back in 2009, offering $50m for what was then a much smaller company. That offer ended with Beach holding a 23 per cent stake in Drillsearch, which was subsequently sold.
Today, Drillsearch has a market capitalisation of $585m.
Cooper Energy would be an easier target for Beach to digest, with the group's current market capitalisation just $148m.
One banker said any M&A miscue by Beach could leave it vulnerable to a takeover from a larger international group. The banker said Beach's ownership of a minority interest in the Moomba gas plant and associated infrastructure would make it a preferred target for larger international groups interested in the basin, given the importance of existing gas plants and pipelines in making unconventional gas fields viable.
In February last year, Beach secured a breakthrough deal with Chevron which will see the US energy giant pump up to $US349m into two of Beach's Cooper Basin exploration projects over the next several years. Chevron has been suggested as a possible acquirer of Beach.
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