AWE in trading halt as suitors come calling
The company's attractive assets - from the Bass Strait and Otway Basin off Victoria to acreage in the Perth Basin, along with Indonesia and the US - could attract a range of local or overseas investors.
A particular attraction is that half its proven and probable gas reserves have not been contracted for sale, giving it prime exposure to the upswing in domestic gas prices.
AWE already works with Origin Energy in the BassGas venture and Santos recently bought into acreage AWE holds in Indonesia, paying $US188 million ($210.7 million) for a half-interest in Northwest Natuna, which made a profit of $60 million.
The cash raised from the sale will allow AWE to fund its planned capital expenditure and exploration programs from operating cash flow.
AWE's spread of assets, coupled with a fully funded growth profile, has prompted broker support for its shares. Seven of the 10 analysts who follow the stock hold positive recommendations for the shares.
Most also value the shares significantly above its last traded price of $1.18.5¢, which puts a price of $620 million on the company. Analysts value its shares at $2.
Citi has a $2.37 a share price target for AWE shares, which makes its shares "the best value small-cap exploration and production in our sector in our view".
A key attraction is AWE seeks to double production by 2017, with its growth ambitions fully funded.
"While there is some execution risk, we think the stock is heavily discounted for these risks," Citi told clients.
AWE has a wide-open share register. Its top four shareholders are institutional investors, led by IOOF with 7 per per cent, Dimensional Funds 6 per cent, AMP 5.6 per cent and Westpac 5 per cent.
Frequently Asked Questions about this Article…
AWE is in a trading halt because it received a 'non-binding and conditional' merger proposal, which has attracted takeover interest due to surging domestic gas prices.
AWE is considered an attractive investment due to its diverse assets in regions like the Bass Strait, Otway Basin, and Perth Basin, as well as its exposure to rising domestic gas prices with half of its gas reserves not yet contracted for sale.
AWE's partnerships, such as with Origin Energy in the BassGas venture and Santos in Indonesia, provide financial support and strategic alliances that help fund its capital expenditure and exploration programs.
Analyst sentiment towards AWE shares is generally positive, with seven out of ten analysts recommending the stock and valuing it significantly above its last traded price, with some targets as high as $2.37 per share.
AWE aims to double its production by 2017, with its growth ambitions fully funded, making it an appealing prospect for investors looking for growth in the energy sector.
The major shareholders of AWE include institutional investors such as IOOF, Dimensional Funds, AMP, and Westpac, holding significant percentages of the company's shares.
While AWE has growth potential, there is some execution risk involved. However, analysts believe the stock is heavily discounted for these risks, offering a potentially rewarding investment.
AWE's asset portfolio, which includes valuable regions in Australia, Indonesia, and the US, contributes to its market valuation by providing diverse revenue streams and exposure to lucrative gas markets, leading analysts to value its shares above the current market price.
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