Shares in AWE have jumped after a Chinese state-owned energy giant made a new takeover bid for for the Australian oil and gas group.
China Energy Reserve and Chemical Group (CERCG) is now offering 73 cents a share for AWE, three days after withdrawing a bid of 71 cents a share announced in November.
The new all-cash takeover offer made on Friday values AWE at approximately $463 million.
AWE shares closed seven cents, or 10.6 per cent, higher at 73 cents on Friday – pushing past the 70 cents reached on December 4 and hitting their highest level since August, 2016.
CERCG says the two companies have been in unproductive discussions for almost two months, so now it is making its offer direct to shareholders.
The state-owned giant says it has improved its proposal after analysis identified untapped reserves at AWE’s main growth asset, the Waitsia gas field in the Perth basin.
AWE has called Waitsia the largest onshore gas discovery in Australia in 40 years, capable of supplying around 10 per cent of Western Australia’s domestic market needs.
The improved offer price represents a 46.1 per cent premium on AWE’s recent capital raising issue price of 0.50 cents per share.
CERCG managing director Australia Liping Xuan said the new offer affords AWE shareholders the chance to realise “compelling value” for their investments.
“This offer, directly to to AWE shareholders, provides them with the opportunity to lock in certain, all-cash value at an attractive price while removing the significant operational and market risks associated with AWE,” Ms Xuan said in a statement on Friday.
If the AWE board opened its books and allowed CERCG to perform due diligence “other currently unidentified value” might also be unearthed, the company said.
CERCG said AWE’s inexperience in operating a major Australian gas field, its failure to secure binding gas sale agreements alongside a decade of unacceptable shareholder returns as reasons shareholders should back the offer.
The offer is subject to a 50 per cent minimum acceptance condition, foreign review board approval and lodgement of a bidder’s statement with the stock exchange, the securities commission and AWE shareholders.
RBC Capital Markets oil and gas analyst Ben Wilson said the new bid is only a minor improvement the first offer of 71 cents a share.
“We still think bid pricing is too low and is below the A$0.90 cents share price target we have for AWE,” Mr Wilson said.
Shares in the oil and gas producer collapsed from 70 cents to below 60 cents on Tuesday after CERCG withdrew its initial $430 million bid.