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September 10 - 16, 2010
The Independent Weekly
Shares in Innamincka
Petroleum soared after it
agreed to a friendly merger
with Drillsearch Energy, the latest
proposal in a wave of efforts to
consolidate permits in South
Australia s Cooper Basin.
Shares in Innamincka, an oil and
gas explorer, jumped more than 40
per cent to 13.5 cents in early trade
but settled back to 11.5 cents, up 2.6
cents, or 29.21 per cent.
Shares in Drillsearch, an oil
and gas producer, had fallen half
a cent, or 7.81 per cent, to 5.9 cents
after emerging from a trading halt
entered into yesterday.
The combined entity would be
the "leading mid-tier oil and gas
company" in the Cooper Basin, the
companies said in a joint statement.
Lawyers Norton Rose Australia,
which is acting as legal adviser to
Innamincka, said the deal reflected
the growing trend for consolidation
of junior to mid-cap oil and gas
companies with complementary
Drillsearch was last year the
subject of an unsuccessful takeover
proposal by Beach Petroleum, which
wanted to consolidate their permits
in the Cooper Basin.
Ground in the Cooper Basin is
tightly held, so companies seeking
to increase their landholdings in the
hydrocarbon-rich area need to do so
Under the deal announced on
Wednesday, Innamincka sharehold-
ers have been offered 2.5 Drillsearch
shares for each Innamincka share
This gives Innamincka an implied
value of 16 cents per share, based
on Drillsearch s closing price
on Monday, before it entered the
trading halt, giving Innamincka a
price tag of $41.8 million, compared
to its current market capitalisation
of about $31.8 million.
The merged entity would have
a market capitalisation of more
than $150 million and combined oil
production of over 300 barrels per
This would rise to 600 barrels per
day with the start of production at
the Chiton oil field in the Cooper
Basin s Western Flank Oil Fairway.
Innamincka chairman Adam
Johnson said the planned merger
via a scheme of arrangement
made "compelling strategic sense,
bringing together two highly
complementary Cooper Basin asset
"It gives Innamincka sharehold-
ers exposure to a much larger
conventional oil and gas project
pipeline, especially expanding
shareholders exposure to the
prolific Western Flank Oil Fairway,"
Mr Johnson said.
Drillsearch chairman Jim
McKerlie said the proposed
tie-up would strengthen its wet
gas business with the addition
of Innamincka s gas and liquids
Drillsearch increased its interest
in four wet gas discoveries in the
The proposal requires
Innamincka shareholder and court
A new bulk-haulage rail company is
expecting to earn up to $450 million
through a contract to transport
iron ore for IMX Resources in South
Specialised Bulk Rail (SBR) has
been established by Peter Smith,
owner and founder of SCT Logistics,
a private rail company which has
been operating on the east-west rail
corridor for 35 years.
Its contract with IMX Resources
will take effect from mid-October,
when the first of two 8000-tonne
trains will begin carrying iron ore
900km from the resource company s
Cairn Hill mine, south-east of
Coober Pedy, to Port Adelaide.
Cairn Hill was officially opened at
the end of last month and is the first
iron ore mine in South Australia
for more than a century. The project
contains magnetite iron ore, copper
and gold, and is a joint venture
between IMX and Sichuan Taifeng
Group of China.
SBR CEO Geoff Smith said his
company could move up to two
million tonnes of iron ore a year.
"It is an exciting development
for our company," he said. "We
genuinely feel that the Australian
mining industry will welcome
increased competition into the bulk
rail haulage sector and appreciate
the fresh approach that we will
bring to the market."
The IMX contract is expected to
generate more than $150 million for
SBR as part of stage one, increasing
to $300 million with the roll-out of
The first flows from Stuart
Petroleum s Worrior 7 well in the
Cooper Basin have produced oil at
the rate of 2300 barrels a day.
"This flow rate was measured
over a five-hour period prior to the
well being shut in as a producer,"
Stuart said earlier this week.
The company operates the
Worrior oilfield with a 70 per cent
interest, with the remaining stake
held by Cooper Energy.
Its statement saw Stuart shares
rise 10 cents, or 20 per cent, to 60
cents on Monday. This follows a
surge last month following the
announcement the company had
turned around last year s loss to
post a full-year after-tax profit for
Managing director Tino
Guglielmo said in August that
production in 2010/11 would likely
exceed 350,000 barrels of oil,
compared to just 193,000 barrels the
Last financial year, production
dropped 43 per cent due to unusual
flooding in the Cooper Basin and
natural field decline.
Jim McKerlie chairs Drillsearch Energy,
which will join forces with Innamincka
Petroleum in a new friendly merger
A new bulk-haulage company will be
using SA's train tracks from November.
Photo: John Donegan
Stuart Petroleum's Worrior well site in the Cooper Basin.
Photo: Sam Noonan
Stuart's shares surge
as flow rates ramp up
New rail company in for long haul
Financial disadvantage is about more than just money.
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