Cooper Basin oil and gas explorer and developer Senex spooked investors on Monday with what appears to have been an ill-thought-out plan to expand by acquisition, through the intended purchase of fellow mid-size explorer AWE.
But the proposal was withdrawn before it was made formal, prompting investors to dump Senex shares.
Senex fell a heavy 8.4 per cent to close at the day's low of 70.5¢, with AWE rallying a handy 8.5 per cent to $1.27.
Before the start of trading on Monday, Senex withdrew a proposal to merge the two entities via a share swap, intending to offer 1.9 Senex shares for each share held in AWE.
Senex had hoped to engage quietly with AWE, but because its plans for what it hoped would be a friendly merger were flushed out before it could conduct due diligence on the target, it decided to walk.
Senex chief executive Ian Davies said marrying his group's Cooper Basin assets with AWE's emerging cash flow, especially from its offshore assets, would have created growth options.
A merged entity would have had a presence in three onshore basins - the Cooper and Perth basins in Australia along with the Eagle Ford shale play in the US - which were all attractive, he said. "With the Cooper Basin and the other AWE onshore plays offering high-growth potential, marrying that with its cash flow from offshore projects" was the attraction, Mr Davies said.
"We wanted to have a conversation and conduct due diligence. There was nothing hostile and nothing unfriendly" in our approach, he said.
"There was no bid; there was no offer capable of being accepted."
But the move, described by analysts as a "left-field approach", surprised investors, in part because Mr Davies has been running the company for more than three years and had not flagged acquisitions.
"He's just trying to grow the company" with the bid, Wilson HTM analyst James Redfern said.
"It didn't work. It obviously spooked the market. It's now back to the drawing board."
Mr Redfern speculated that Senex, by merging with AWE, hoped to create a group valued at about $1.5 billion, which would almost put it on a par with Beach Energy, worth about $1.7 billion.
Senex has a range of assets in the Cooper Basin typically hosting small fields which need heavy exploration spending, analysts said.
The approach was made public when it did not need to be, one Senex adviser said, prompting Senex to walk.