THE DIRECTORS of WestSide Corporation have urged company shareholders not to accept what it says is an undervalued takeover offer from China-based Landbridge Energy Australia.
In a letter to shareholders, WestSide said the offer of 40 cents per share, made on 24 April, did not take into account the effect of a recently-signed gas sales agreement with the Gladstone LNG consortium – comprising Santos, Total, Petronas and Kogas.
The 20-year gas sales agreement will see the Meridian joint venture (in which WestSide holds a 51 per cent stake) sell up to 65 terajoules of gas per day to GLNG – monetising about two thirds of WestSide’s proved and probable reserves.
At the maximum production rate of 65TJ/d, WestSide says this could generate annual revenue in excess of A$110 million.
Drilling on the first well on the Meridian gas field started in late May, with company managing director Mike Hughes saying he expected the well to be commissioned in July.
“Significantly, this will be the first new production well to have been drilled in the Meridian field for more than 18 months,” he said.
“Drilling for this Phase 1 program, involving six new production wells, is scheduled to be completed in August. Planning is also underway for the next phase of drilling and work has commenced on options for compression expansion in the field.”
WestSide said the Landbridge offer did not adequately recognise either the position the company was now in, or the potential value to shareholders of both the agreement and the uncommitted reserves of the Meridian gas field.
“Landbridge’s offer comes ahead of expected increases in gas demand and prices which would provide significant value uplift for WestSide’s remaining reserves beyond the GLNG gas sale agreement,” the company said in its Target’s statement.
But in its second supplementary bidder’s statement, Landbridge said these were forward looking statements, and as such were based on assumptions.
“This is of concern as WestSide has historically failed to meet forward looking production targets,” Landbridge wrote.
Finally, WestSide told shareholders that it expected Landbridge would continue to seek control of WestSide if it was unsuccessful the first time, noting the company had only bought its 19.99 per cent stake in recent months.
“Landbridge’s stake in WestSide represents a significant investment in a company over which Landbridge has no control,” it said.
“Given this large commitment and lack of control, your board considers that Landbridge may continue to seek control of WestSide after a first rejection.”
This claim was noted by Landbridge, with the company saying WestSide’s claim was overstated and misleading.
Landbridge also said WestSide had failed to provide disclosure on its forecast financial performance for the current financial year or the calendar year to 2015.
“The directors of WestSide have not provided their own view of the value of WestSide … (and have) not sought the views of an independent expert to provide a detailed analysis of the value of WestSide,” the group said.
Landbridge argued that WestSide’s claim the offer was undervalued was unsubstantiated, given the company’s unwillingness to provide a valuation.
“WestSide shares have not closed above the offer price for over 12 months from the date which the offer was made public and, in Landbridge’s view, have increased only as a consequence of the Landbridge announcement to make an offer to WestSide shareholders.”
However, WestSide said the offer also took advantage of a downturn in the WestSide share price, brought on by “the distractions of the Liquefied Natural Gas Limited and PetroChina takeover approaches during 2012 and 2013 not proceeding.”
The offer period ends on 24 June.