AWE Ltd (ASX: AWE)

Sustainable Performance: In the recent update, AWE reduced its corporate debt facility from A$300 million to A$125 million which is aligned with AWE’s current funding requirement and would result in savings of approximately $1.6 million per year in fees. It was also found that AWE needs to pay US $ 7.0 million as an underlying principal amount in 30 days because of the tax assessment done by ITO (The Indonesian Tax Office) in relation to acquisitions done in 2012. AWE has also extended its final payment date for the sale of Bulu PSC, including Lengo Gas Project.

The group has lately received a proposal from Mineral Resources Limited (MRL) for a scrip acquisition at $0.80 per share but AWE is still evaluating the proposal and the board will look at it vis-à-vis the proposal from China Energy Reserve and Chemical Group Australia. MRL has given its 2018 outlook based on the acquisition of AWE and intends to provide downstream secondary processing initiatives in next 20-25 years. The group will also use in-ground gas reserves to offer key mining industry clients and will also to build a strong relationship with the joint venture partners of AWE’s non-Perth Basin assets.

Meanwhile, AWE has appointed UBS AG, Australian Branch and Highbury Partnerships as financial advisors and Allens as legal advisors. AWE has recommended its shareholders not to take any action in relation to proposed bids unless and until they receive AWE Board’s formal recommendation. Looking at the financial performance, there were significant non-cash impairments and a statutory net loss of $217 million after tax was reported. Total annual revenue was in line with the expectation to fall within the range of $100-$110 million but it was less as compared to previous year. The production level was also less as compared to last year. AWE’s major projects have been Waitsia Gas Project, BassGas Project, Casino Gas Project and AAL Oil Project, and the success of Waitsia-3 resulted into AWE increasing its share of 2P Reserves for the field by 25% to 228 PJ of sales gas. Other projects also performed well and resulted into increase in production.
 
 
Performance Summary (Source: Company Reports)
 
Stock Performance: In the past six months (as at December 14, 2017), the share price increased by almost 87.6%; and in the last one month, it rose tremendously by 49.11%, so by looking at the performance and the acquisition proposal which is still under consideration, we recommend a wait and watch approach and give a “Hold” at a current price of $0.83.

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