Antares in administration

After failing to complete an asset sale for the third time, Antares has called in the administrators.

The farce at shale oil driller Antares Energy appears to be at an end, with the business calling in administrators to sell its remaining Permian Basin shale assets.

That all sounds straightforward, if disappointing, but in truth the situation has been far more complex.

A year ago, Antares claimed to have a buyer for its shale assets but, after twice claiming the same thing and twice failing to complete a sale, regulators demanded the buyer be named. When Antares refused, it was suspended from trading on the ASX.

Since then, oil prices plunged, the value of its ground fell and its buyer – later outed as a private equity firm – was scared away. With no buyer, angry noteholders who were due payment of $60m in debt last month, demanded immediate repayment.

We don’t blame them. In our view, a recovering oil market and nearby asset sales suggest that Antares’ shale should have fetched at least $100m but poor management disclosure understandably frightened noteholders. Without a deal, Antares had no choice but to call in administrators.

Yet the farce didn’t stop there. One group of noteholders demanded a new administrator so the original was sacked and replaced. The new administrator has pledged to quickly sell Antares assets to repay noteholders and, perhaps, shareholders.

The situation has ended far worse that we expected. When we first recommended Antares as a Speculative Buy back in Antares Energy: shale we dance on 24 Sep 12 (Speculative Buy – $0.48), we highlighted latent asset value: our thesis was a buyout. Three offers – all multiples of the share price – came and yet none could be executed.

Losing money is always painful but to lose like this is particularly tormenting. What might have been a wildly successful investment has descended in a bust.

Well, not yet. The administrators will sell assets into a relatively healthy market. AWE’s recent sale of Sugarloaf (see AWE’s sweet asset sale) provides both torment and hope. It damns the execution of management but also suggests a sale may generate a surplus. We will see.

There is nothing else for shareholders to do but wait for a completion of the sale and rue the events that have led to it. 

Disclosure: The author owns shares in Antares Energy.

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