DRILLSEARCH has made an off-market scrip offer for fellow Cooper basin player Ambassador Oil and Gas which values the company at about $41.6 million.

Drillsearch will offer Ambassador shareholders one of its shares for every 5.4 Ambassador shares held, implying a value of 29.3 cents per Ambassador share, based on the closing price of Drillsearch shares of $1.58 on 27 May.

Ambassador chairman David Shaw said both the Ambassador board and its largest shareholders have signalled their intention to accept the offer in the absence of a better deal.

“The Offer represents a compelling opportunity for all Ambassador shareholders to capture a premium for their shareholding, retain exposure to Ambassador’s key asset, and to become part of a profitable mid-tier oil and gas producer,” he said.

Drillsearch chairman Jim McKerlie said the transaction offered his shareholders a significant opportunity.

“The Coolibah 3D seismic survey has substantially de-risked both permits and identified significant prospectivity in the area, both in terms of conventional wet gas and the unconventional exploration being pursued by the existing PEL 570 joint venture.”

The companies said there was a “compelling strategic rationale” for the offer, combining “Ambassador’s 47.5 per cent non-operated interest in PEL 570 with Drillsearch’s 80% owned and operated interest in the adjacent PEL 101.

Drillsearch had acquired the 41,300 hectare Coolibah 3D seismic survey over the two blocks and PEL 182 in 2013 following its takeover of Acer Energy.

Ambassador is fully carried by New Standard Energy for a $42.5 million exploration program over PEL 570, while Drillsearch plans to start a two-year appraisal and development campaign in PEL 101 to further de-risk the conventional prospectivity of the permit in the 2015 financial year.