WCL 0.00% 39.5¢ westside corporation limited

iress wcl potentially 2nd largest qld csg play

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    Dow Jones UPDATE: Westside To Spend Up To A$80M In Coal Seam Gas Deal

    (Adds Anglo American comments, shares)
    By Ross Kelly
    SYDNEY (Dow Jones)--Little known Westside Corp. Ltd. (WCL.AU) on

    Wednesday signaled its intention to become a more serious player in Queensland state's booming coal seam gas sector by announcing it has agreed to spend up to A$80 million buying acreage from Anglo American PLC (AAUKY) and Mitsui & Co. Ltd. (MITSY).

    The Brisbane-based company, which already explores for CSG in several permits in Queensland's Bowen Basin, said the proposed deal could make it the state's second biggest listed pure-play CSG company behind Arrow Energy Ltd. (AOE.AU).

    Over A$20 billion has been spent on mergers and acquisitions over the past two years in Queensland's CSG sector as multinationals turn to alternative sources of fuel as traditional supply declines.

    Gas demand in Asia is projected to increase sharply, especially in densely populated China and India, and Queensland is ideally positioned to serve the regional market through liquefied natural gas, or LNG, plants built on its northern coast.

    Westside said it has signed a conditional agreement to acquire Anglo American's stake in the Dawson Seamgas CSG assets and may also buy Mitsui's stake subject to the consideration of preemptive rights.

    The deal would see Westside taking up to 100% of the producing fields, near Moura in Queensland's Bowen Basin, and up to 50% of two adjoining permits, boosting its proven and probable reserves by up to 212 petajoules.

    "Westside's total acquisition cost is expected to be between A$55 million and
    A$80 million, depending on the ultimate ownership interest acquired, with a proportional reduction of Westside's investment if Westside seeks to work with a joint venture partner," the company said in a statement.

    The size of the acquisition is surprising considering that even the bottom end of the expected price tag is higher than Westside's market capitalization before the deal was announced.

    Westside intends to issue new shares to existing shareholders to help fund the transaction but won't provide more details until there's further certainty on how much it will need to raise.

    The resolution of various preemptive rights could take up to 90 days, it said. Shareholders wanting more exposure to Queensland CSG initially pushed Westside's shares higher but late in the trading session they were flat at 48 Australian cents after rising as high as 56.5 cents.

    The assets Westside has agreed to buy are adjacent to its existing Paranui CSG project and currently produce about 12 terajoules of gas per day for the domestic market through a supply contract with AGL Energy Ltd. (AGK.AU).

    They are also adjacent to the proposed route for the Surat to Gladstone pipeline. The port city of Gladstone is the proposed home of up to five LNG projects.

    "Only a small percentage of the gas is contracted today to AGL of the total
    reserves," Westside Chairman and Chief Executive Angus Karoll told Dow Jones Newswires.

    BG Group PLC (BG.LN) already has a 50% interest in some of Westside's existing exploration acreage and is building one of the five LNG plants.

    "We're already having discussions with them on what we're going to do
    with our gas and we think they're a very logical potential market for us,"
    Karoll said.

    Karoll said Westside expects to announce an upgrade of its proven and probable reserves at its existing acreage in the first quarter of 2010.

    Anglo American said in a statement that its coal assets at the Dawson Mine won't be affected by the sale of the CSG business.

    "The business is relatively small in scale, representing less than 2% of the coal seam gas reserves in Queensland," it said.

    -By Ross Kelly, Dow Jones Newswires; 61-2-8272-4692; [email protected]
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