Analysts say Senex bid mostly hot air

Senex shares have jumped 32 per cent this year and hit a 12-year high of 90? yesterday morning, based on media reports that AGL Energy, French oil giant Total or others might bid for the $774 million company.

Last week Senex told the ASX there was no unannounced information that would explain the share trading and pointed to a string of reports in The Australian Financial Review and the company's inclusion in a list of top takeover targets for 2012, compiled by broker JPMorgan, based on its "huge 75 to 100 (trillion cubic feet) of shale gas-in-place".

The managing director, Ian Davies, said last year Senex had held initial talks with international energy producers interested in a potential partnership.

But RBC Capital Markets analyst Andrew Williams said yesterday: "You never say never on these things but my personal view is, if you're an acquirer, you probably want to see a bit more work on the ground."

Mr Williams said that while Senex had the largest net exploration acreage for unconventional gas in the Cooper Basin in South Australia, it had only drilled one well, Vintage Crop-1, which gave encouraging results but was neither fracked nor flow-tested.

On January 6, Senex announced the start of a three-well drilling program to assess the unconventional gas potential of the shales, tight sands and coals in its Cooper Basin permit area.

Mr Williams said while there was excitement about the potential for a large unconventional gas resource at the Cooper Basin, only three wells had been drilled there so far, including Senex's Vintage Crop.

The other two - Holdfast-1 and Encounter-1 - were drilled by Beach Energy, fracked and flow-tested at 1.8 million cubic feet per day.

About 20 more wells would be drilled this year by Senex, Beach and the Cooper Basin joint venture operator Santos, Mr Williams said.

RBS Morgans analyst Roger Leaning said Senex could be a first-mover in Cooper Basin shale, which was especially attractive because the province was well-known, pipeline infrastructure was in place and coal seam gas extraction was facing increasing regulatory hurdles.

For Senex, he said, the "blue sky is potentially the market cap plus again but it's very early stages".

Senex shares closed down 1? to 84? after profit-taking, analysts said. Senex, which gave a separate update on its Growler oil exploration program yesterday, and AGL Energy declined to comment.