Drillsearch Energy Takeover offer for Acer Energy - 4 October 2012
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Drillsearch Energy Takeover offer for Acer Energy 4 October 2012
2 Agenda 1. Overview of the Offer 2. Why Acer shareholders should accept the offer 3. Transaction rationale 4. Combined group 5. Funding 6. Summary Appendix
3 1. Overview of the Offer
4
Offer overview
Transaction
Drillsearch today announced an all cash offer to acquire Acer Energy Limited (ASX:ACN) (Acer)
overview
25.5¢ cash per share, implying a value for Acer of $118 million
Terms The Offer Price represents a 53% premium to the three-month volume weighted-average price
(VWAP)(1) and a 31% premium to Acer’s last closing price
Republic Investment Management (Republic) has sold a 19.90% relevant interest in Acer to
Drillsearch’s Drillsearch, making Drillsearch the largest shareholder in Acer
relevant interest
in Acer Republic still holds a 18.82% relevant interest in Acer, and has indicated it intends to accept the
Offer(2)
The Offer is fully funded through existing Drillsearch cash balances and a debt facility with
Funding
Commonwealth Bank of Australia
Conditions The Offer is unconditional other than Prescribed Occurrences
Drillsearch intends to immediately acquire Acer Shares on-market
Other Accelerated payment terms – Acer shareholders will receive payment within 5 business days of the
later of the date the Offer is freed from Prescribed Occurrences and Drillsearch receiving the
acceptance
(1) Based on Acer’s last close price as at 3 October 2012 of 19.5¢ , and Acer's three-month volume weighted average price up to and including 3 October 2012 of 16.6¢.
(2) Republic has advised Drillsearch that it intends to accept the Offer in respect of Republic’s remaining 18.82% shareholding in Acer on the earlier of (i) 21 days from the Announcement Date; and (ii) Drillsearch
obtaining a relevant interest in Acer Shares representing 35% of all Acer Shares, subject to there being no superior announced offer at that time.
5 2. Why Acer shareholders should accept the offer
6
Why Acer shareholders should accept the offer
The Offer represents a significant premium to recent trading prices of Acer Shares
53% premium to the three-month VWAP(1)
31% premium to Acer’s last closing price
Acer’s shares have not traded at or above the offer price for more than 3 years
The offer price represents a full and fair price, 100% cash and certainty of value
Republic sold a 19.90% interest in Acer to Drillsearch, making Drillsearch Acer’s largest
shareholder
Republic, Acer’s 2nd largest shareholder, has indicated support for the Offer and intends to
accept the Offer for its remaining 18.82% interest(2)
The Offer is unconditional other than Prescribed Occurrences
Accelerated payment terms
Drillsearch intends to acquire Acer Shares on-market immediately
(1) Closing price, VWAP and three year trading range of Acer Shares over the relevant period up to and including 3 October 2012.
(2) Republic intends to accept on the earlier of 21 days from announcement of the Offer and Drillsearch obtaining a 35% Relevant Interest in Acer Shares, subject to there being no superior announced offer at that time.
7 3. Transaction rationale
8
Drillsearch’s strategy
NEAR TERM
Rapidly develop new oil discoveries and accelerate 3D seismic-based
exploration in prospect-rich Western Flank and emerging Inland-Cook
Oil Fairways
MID TERM
Expand development and production of liquids-rich Wet Gas from
existing discoveries and prove up significant Wet Gas Reserves
through expanded exploration throughout Wet Gas play fairway
LONG TERM
Explore, appraise and delineate unconventional potential in Central,
Western and Southern Cooper project areas to prove up a world-class
resource with clear access to premium gas markets
9
Acer – an acquisition that fits
NEAR TERM
Western Flank Oil – PEL 91 Western Corridor – PEL 182
Inland-Cook Oil Patchawarra – PEL 100
Patchawarra – PEL 101 Wet Gas
MID TERM
Ginko, Crocus
Western Cooper Wet Gas Pilots
GMI Ridge – PEL 103 Wet Gas,
Yarrow
LONG TERM
Central Cooper Shale/Tight Gas
GMI Ridge – PEL 103 Tight Oil,
Flax / Juniper
Western Cooper Shale/Tight Gas
10
Transaction rationale
Post acquisition, the combined group will hold the largest discovered, uncommitted
Enhanced conventional gas resource in the Cooper Basin outside of the Cooper Basin Joint Venture
scale partners
Combined group will have a 2P+2C resource base of 38.7 mmboe
Leverage Drillsearch is the only independent to commercialise Cooper Basin gas discoveries
capabilities Drillsearch uniquely positioned to develop and commercialise Acer’s assets
Enhanced
Scale of expanded conventional gas resource base enhances position to exploit supply
market
shortages
position
Drillsearch is well positioned to fund exploration and development of expanded asset portfolio
Well funded
Strong near-term cash flow from Western Flank oil discoveries and wet gas production11 4. Combined group
12
The combined footprint in the Cooper Basin
UNCONVENTIONAL
WET GAS
Short, medium and long-term growth opportunities13
A Robust Combined Reserve & Resource Base
45.0
Estimated Combined Cooper Basin Reserves and Resources
40.0
Gas
35.0
Acquisition contributes ~15.7
NGL MMBOE 2C Contingent Resources
11.2
Oil
30.0
3.4
25.0
mmboe
1.1
20.0 6.0
15.0 3.2
1.2 Drillsearch
combined 2P + 2C
10.0 4.5 = 22.9 mmboe
3.0
5.0
5.0
-
2P 2C 2C
DLS Reserves DLS Resources ACN Resources
Source: Drillsearch GCA Independent Reserves Report as at 31 July 2012, RISC Independent Technical Specialist’s report: Innamincka Petroleum dated January 2011 and Eagle Bay Resources Pty Ltd (with respect
to PEL 182) and Acer ASX announcements. Acer’s reserves and resources are adjusted from the RISC Independent Technical Specialist’s Report to reflect Acer’s current interests in PRL 14, 17 & 18 and PEL 100, 101
& 103.
The combined group will represent a significant portfolio of contingent gas resources, leveraging Drillsearch’s
proven ability to commercialise gas in the Cooper Basin14
Forward Work Program for Acer
Subject to Drillsearch undertaking a review of Acer's operations and assessing Acer's assets on an asset-by-asset
basis following the close of the Offer, Drillsearch presently intends to conduct the following work program
Indicative Multi-Year Work Program
Sep Q Dec Q Mar Q Jun Q Sep Q Dec Q Mar Q Jun Q
2012 2012 2013 2013 2013 2013 2014 2014
Tight Oil – Flax
Well Work Overs
Drilling – exploration (3-6 wells)
Acer’s recently announced
Appraisal – completion & testing (3-6 wells) work program
Western Flank Oil – PEL 182
Seismic – 3D (250km2)
Proposed DLS Wet Gas Program – PEL 103, 101
Exploration
Development Wet Gas Pilot Projects
Drillsearch’s plan for Acer assets is focused 80% on development activities15
Wet Gas - An Emerging Cash Flow Engine
In Drillsearch’s hands,
Acer’s assets can
contribute to this growth
ACN
BPT
DLS16 5. Funding
How is the proposed acquisition funded? 17
Sources of funds (A$m) Uses of funds (A$m)
DLS cash requirement(1) 25 Share Purchase @ 25.5 cps 118.4
CBA debt facility 100
Transaction costs 6.6
TOTAL 125 TOTAL 125
With emerging strong cash flows from Western Flank Oil and Wet Gas production, Drillsearch believes it can
substantially amortise the acquisition financing and replace any remaining balance with long term debt financing
(1) As at the Announcement Date, Drillsearch had cash reserves of approximately $70.4 million (this amount includes the funds that will be used to settle the acquisition of 19.90% of Acer
from Republic).Western Flank – A Near-Term Production Engine 18
Western Flank Oil Production Estimates
12000
10000
8000
BOPD
6000
4000
2000
0
Sept Q 2012 Dec Q 2012 Mar Q 2013 June Q 2013 Sept Q 2013 Dec Q 2013
Oper PEL 91 Oct Forecast Gross RISC 1P Bauer Only Gross DLS PEL 91 June Forecast Net19 6. Summary
20 Summary The Offer provides Acer shareholders with certainty of value and a significant offer premium Compelling transaction rationale – potential strong growth contributor to Drillsearch’s Wet Gas Business Drillsearch has acquired 19.90% of Acer, making it the largest shareholder Republic, the second largest shareholder with 18.82%, intends to accept the Drillsearch Offer in the absence of a superior announced offer (1) Further information regarding the Offer is contained in the Bidder’s Statement which has been lodged with ASX today (1) Republic has advised Drillsearch that it intends to accept the Offer in respect of Republic’s remaining 18.82% shareholding in Acer on the earlier of (i) 21 days from the Announcement Date; and (ii) Drillsearch obtaining a relevant interest in Acer Shares representing 35% of all Acer Shares, subject to there being no superior announced offer at that time.
21 Appendix
22
Profile of Acer
Overview Permit Summary
Acer is an ASX-listed energy
company (ASX: ACN) with
exploration and production assets
primarily located in the onshore
Cooper Eromanga Basin, the
onshore Darling Basin and
offshore in the Bass Basin
between the mainland and
Tasmania
Acer has acreage of ~21,400km2
comprising both production and
exploration licences; the most
advanced of these licences are
located in the Cooper Basin
where the company is targeting
multiple ‘play’ types
Source: Acer investor presentation dated 19 July 2012.23
Comparing Wet Gas to Western Flank Oil
Western Flank Oil Western Cooper Wet Gas
Gross 2P Reserves 7.3 mmbbls Gross 2P Reserves 13.7 mmboe
% Liquids 100% Gross 2P Liquids 5.4 mmboe
Production – current 800 bopd Production* – current 1100 boepd
Production – YE2012 5000 bopd Production* – YE 2012 1100 boepd
Oil price FY 2012 avg $114/bbl Liquids price FY 2012 $104/boe
F&D Cost ($/bbl) $9-12/bbl $84-93 $65-69 F&D Cost ($/boe)* $11-15/boe
Per bbl Per bbl
OPEX ($/bbl) $12-18/bbl OPEX ($/boe)* $24/boe
Net Margin ($/bbl) $84-93/bbl Net Margin ($/boe)* $65-69/boe
All figures above are gross and DLS share is 50%
All figures above are gross and DLS share is 60%
*Adjusted to eliminate all gas volumes and revenues
and assigned all exploration, development and OPEX
costs to NGL volumes to calculate F&D and OPEX
costs per boe and Net Margins
Western Cooper Wet Gas simply as a liquids project has favourable
economics through working cooperatively with the SACBJV24 Disclaimer and Important Notice This presentation does not constitute investment advice. Neither this presentation nor the information contained in it constitutes an offer, invitation, solicitation or recommendation in relation to the purchase or sale of shares in any jurisdiction. This presentation does not contain all information that Acer Energy Limited shareholders may require in order to make a decision as to whether to accept the offer by Drillsearch. Acer Energy Limited shareholders should refer to the Bidder's Statement lodged with ASX on 4 October 2012. Shareholders should not rely on this presentation. This presentation does not take into account any person's particular investment objectives, financial resources or other relevant circumstances and the opinions and recommendations in this presentation are not intended to represent recommendations of particular investments to particular persons. All securities transactions involve risks, which include (among others) the risk of adverse or unanticipated market, financial or political developments. The information set out in this presentation does not purport to be all inclusive or to contain all the information which its recipients may require in order to make an informed assessment of Drillsearch. You should conduct your own investigations and perform your own analysis in order to satisfy yourself as to the accuracy and completeness of the information, statements and opinions contained in this presentation. To the fullest extent permitted by law, the Company does not make any representation or warranty, express or implied, as to the accuracy or completeness of any information, statements, opinions, estimates, forecasts or other representations contained in this presentation. No responsibility for any errors or omissions from this presentation arising out of negligence or otherwise is accepted. This presentation may include forward looking statements. Forward looking statements are only predictions and are subject to risks, uncertainties and assumptions which are outside the control of Drillsearch. These risks, uncertainties and assumptions include commodity prices, currency fluctuations, economic and financial market conditions in various countries and regions, environmental risks and legislative, fiscal or regulatory developments, political risks, project delay or advancement, approvals and cost estimates. Actual values, results or events may be materially different to those expressed or implied in this presentation. Given these uncertainties, readers are cautioned not to place reliance on forward looking statements. Any forward looking statements in this presentation speak only at the date of issue of this presentation. Subject to any continuing obligations under applicable law and the ASX Listing Rules, Drillsearch does not undertake any obligation to update or revise any information or any of the forward looking statements in this presentation or any changes in events, conditions or circumstances on which any such forward looking statement is based. The Reserves and Resources assessment follows guidelines set forth by the Society of Petroleum Engineers - Petroleum Resource Management System (SPE-PRMS). The Reserves estimates for Drillsearch used in this presentation were compiled by Mr David Evans, Chief Technical Officer of Drillsearch Energy Ltd, who is a qualified person as defined under ASX Listing Rule 5.11 and has consented to the use of the Reserves figures in the form and context in which they appear in this presentation. The statements in this presentation about Acer’s resource estimates have been extracted without material amendment (other than as explicitly noted in the presentation) from information prepared by or for Acer and included in public documents filed by Acer .
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