Norwest Energy shares jump over 30% on takeover offer from Mineral Resources

The share price for domestic Australian gas producer Norwest Energy (ASX:NWE) is up 33% in afternoon trades as Mineral Resources (ASX:MIN) offers to buy Norwest for $403m. 

The Perth-headquartered Mineral Resources (MinRes) is owned by billionaire Chris Ellison, who has his eyes on the gas production potential of the prolific Perth Basin. 

MinRes, an ASX heavyweight with a market cap of $15.5bn, is already Norwest Energy’s largest shareholder. Fun fact, MinRes has logged the second best shareholder returns of any ASX200 company since it listed in 2006. 

Shareholders—and the market at large—appear to be pricing this into the offer.  

Mineral Resources is already the largest holder of onshore gas permits in the Perth and Carnarvon Basins respectively. 

MinRes already owns key assets 

Norwest’s principal assets are two exploration permits in the Perth Basin (EP368 and EP426)—both are held by Energy Resources Ltd (a division of MinRes) and Westranch Holdings; a subsidiary of Norwest. 

Former Norwest CEO Shelley Robertson is the head of energy at Mineral Resources. 

Notably, the deal will effectively de-risk the prospect of developing the Lockyer Deep gas discovery in EP368. MinRes already intends to drill six wells over its WA gas licences between now and late 2024. 

It is probable MinRes is seeking to harvest Perth Basin gas to fuel its own hard-rock mining operations in WA.

Premium to 52W high

The takeover offer, which proposes to give one Mineral Resources share for every 1,367 Norwest Energy shares, reflects a 33% premium to the latter’s closing price on December 15 - a total of approximately $403m. 

It further adds an 11% premium to the company’s 52 week high closing price of 5.4c, clocked back in late August.

Norwest shareholders will therefore become shareholders in the world’s largest ore crushing contractor, also among Australia’s five largest iron ore producers.

A lot going on in Q4

The move comes only days after the Albanese government introduced a price cap for east coast gas producers, and not long after a similar high-profile takeover offer in the energy space. 

Earlier this month, Warrego Energy (ASX:WGO) found itself stuck in a bidding war between Strike Energy (ASX:STX), Kerry Stokes-backed Beach Energy (ASX:BPT) and Hancock Energy owned by Gina Rinehart. 

MinRes and Hancock are close operational partners: Hancock Prospecting, which owns Hancock Energy, owns 3% of Norwest. 

Norwest Energy is advising its shareholders to accept the deal—a move that is unlikely to be contested. 

A look at Norwest's 1Y charts makes obvious the impact of today's news on the company's share price