The Australian newspaper today reported that the Australian Securities and Investments Commission yesterday asked Santos for an explanation after its spokesman was quoted on Reuters saying, “We are sticking to the offer of $1.26 per share, which we believe is a fair price to pay.”
The Australian said that such a final offer would mean that from its close Santos would not be able to return to the fray for another six months, which, in turn, would be “seriously costly” for the company.
But the South Australian company today staunchly denied the quote, saying its spokesperson had been misquoted.
“The Santos spokesperson has been misquoted and, as such, the statement referred to should be ignored,” the company said in a statement to the Australian Stock Exchange today.
“Santos' position on this issue, as outlined in its ASX release on 9 November 2006, is that QGC has not said or done anything since the announcement of Santos' offer, (including releasing details of the NSAI report) that has altered Santos' assessment that its offer of $1.26 per share is fair for QGC shareholders.”
Santos’ statement yesterday said that a recent independent review commissioned by QGC upgrading its proved and probable (2P) coal seam methane reserves failed to contain any information that boosted its value.
QGC on Wednesday announced independent experts Netherland, Sewell & Associates (NSAI) had upgraded its 2P CSM reserves across the Undulla Nose region of its Surat Basin tenements by 64% to 695 petajoules.
The company commissioned the review in response to Santos’ $606 million takeover threat, believing the upgrade would keep its share price high and the company out of Santos' clutches.
But Santos yesterday said QGC’s 695 PJ were still 30% below “QGC’s often stated ‘target’ of about 1000 PJ”.
“Santos looks forward to reviewing QGC’s target’s statement to assess the detailed reasons being used by QGC’s board to support its rejection of Santos's offer.”
The company also disputed QGC’s statement that “NSAI still need to confirm the commerciality of these reserves”, which it said, highlights the risk that these claimed reserves may not be economically recoverable.
“Common oil and gas industry standards require confirmation of commerciality before hydrocarbon volumes can be classified as reserves, and therefore Santos expects QGC to demonstrate the commerciality of the volumes before they are booked as reserves,” it said.
“Despite recent drilling activities, QGC has not announced any reserve additions outside of the Undulla Nose area, with the entire reclassification of volumes coming from within the Undulla Nose.”
Santos said QGC indicated in its recent rights issue prospectus that over 40% of its permit interests are not considered to have any “CSM potential”.
“Further, much of the claimed increase in reserves is not from the most recent six-week drilling program as stated, but from development drilling undertaken some time ago,” it said.
“Santos reiterates that there is no certainty that QGC’s 2P reserves ‘target’ of 1000 PJ will be achieved but even if it was, the reserves valuation multiple implied by Santos’s $1.26 per share cash offer would still be in the range of the multiples for other comparable transactions, as noted in Santos's bidder's statement.”
