• Mitsui eyes Australian oil and gas expansion with AWE takeover
Mitsui eyes Australian oil and gas expansion with AWE takeover
13 Feb, 2018, No Comment

Summary: Japan's Mitsui & Co looks set to expand into a fully fledged operator in the Australian oil and gas sector when it seals its targeted $602 million takeover of AWE, with some expecting the deal to lead to further acquisitions.....


But the trading giant, which already has an Australian oil and gas business, has signalled that job cuts may be on the cards at AWE, saying in its bidder's statement it would carry out a "thorough and broad-based" strategic review of AWE's assets and personnel if its agreed 95¢ a share cash offer is successful.


Speaking to investors last week, Mitsui's general manager of investor relations, Yuji Mano, said a key driver for the acquisition was to gain access to the Waitsia gas field in Western Australia, of which AWE owns 50 per cent.


"One of the biggest objectives of this acquisition is to gain this quality asset," Mr Mano said.


"After 2020, [a] shortage of gas supply is expected, especially in Western Australia, so we believe this will be a long-term and stable business."

Potential operating platform


Mr Mano also pointed out that Mitsui's 20-year-old business in Australia had been limited to a non-operating role in oil and gas ventures managed by other companies. That will change with the takeover.


"Acquiring AWE, which holds functions as an operator, we hope more width and depths will be added to our energy business," he said.



Wood Mackenzie's Saul Kavonic said acquiring AWE could provide Mitsui with the operating platform to expand more broadly in the Australian gas sector and with a stronger domestic gas marketing capability which could provide "synergies" with Mitsui's other Australian interests.


The firm owns minority stakes in the Vincent and Enfield oil projects in WA, the Kipper and Casino gas ventures off the south-east coast, and in the Meridian coal-seam gas project in Queensland. Mitsui's LNG interests, including a stake in the North West Shelf venture and in the proposed Browse LNG project, are held within a different division.


The Japanese player's appetite for expansion in Australia has also fuelled early speculation it could be a bidder for Brookfield Asset Management's stake in Western Australian gas producer Quadrant Energy. A targeted $3 billion-$4 billion IPO for Quadrant was canned late last week, with Brookfield understood to be looking to sell its stake, while fellow major shareholder Macquarie Capital is thought to be keen to remain a longer-term shareholder.

Bidder's statement


Industry sources, however, point out the Brookfield stake in Quadrant, the former Apache Australia gas business in WA, is a non-operating one, posing a complication for an industry player looking to take control of the business, the state's biggest gas supplier.


In its bidder's statement for AWE, which was released on Friday, Mitsui also voiced support for AWE's initiative to reduce costs and streamline its business and hinted at some job losses, saying it would "consider the availability of cost and operating efficiencies" from any overlaps in its business with the target's. It said it would replace AWE's board with Mitsui nominees if it secures a full takeover.


Mitsui's offer easily beat an initial 73¢ a share cash offer from China Energy Reserve and Chemical Group, and an 83¢ a share offer from Perth-based Mineral Resources. AWE's board shifted its support from Mineral Resources' bid to Mitsui's when the cash offer from the Japanese player emerged this month.


AWE shares closed on Monday at 96¢, still 1¢ north of the offer price but reflecting fading hopes of yet another bidder emerging since Mitsui's offer, which opened to shareholders on Monday.

www.afr.com/business/energy/oil/mitsui-eyes-australian-oil-and-gas-expansion-with-awe-takeover-20180211-h0vx5q

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