Troubled north coast coal-seam-gas (CSG) miner Metgasco suffered another setback this week with the collapse of a proposed merger with oil explorer Elk Petroleum.
The failure of the merger comes as the CSG issue hots up for the 28 March election, with Labor calling for a statewide moratorium on CSG activity as a major environmental policy, while also announcing it would return tens of thousands in donations given to its NSW branch by giant CSG miner Santos Ltd.
Metgasco told the Australian Stock Exchange (ASX) it had decided to terminate the proposed merger as it had low chances of securing finance for the deal in the face of falling oil prices.
The company, which is fighting to have the suspension of its north-coast exploration licence lifted, told the ASX conditions on the proposed merger, such as raising finance and lower than expected oil prices, had not been met.
Shares in the ASX-listed Elk, which is currently exploring oil reserves in the Rocky Mountains of the US and building a major oil pipeline in Wyoming, have been suspended as a result. The company has recently suffered a massive drop in its share price as a result of tumbling world oil prices.
The latest share price (as at midday today) for Metgasco was a low $0.021.
Under the proposal, Metgasco’s shareholders were to own 77 per cent of the merged company with Elk shareholders taking the remaining 23 per cent.
In its statement to the ASX, Metgasco says the proposed merger was subject to a number of conditions, including Metgasco’s ability to raise funds to support it ‘a Material Adverse Condition (MAC) associated with oil prices’.
‘The oil price MAC has been triggered. Based on discussions with numerous financial organisations, Metgasco has concluded that the chance of securing acceptable finance is now very low,’ the statement said.
‘This is due to a number of factors, including current oil prices, which are significantly lower than anticipated when the original merger terms were negotiated.
‘As such, Metgasco’s board of directors has decided to exercise Metgasco’s rights and terminate the Merger Implementation Deed.
‘Under the terms of the Convertible Loan Facility, which was put in place to support Elk Petroleum through the merger implementation period, no further payments to Elk Petroleum will be made and Elk Petroleum has 30 days in which to repay the loan plus interest incurred.
‘Of the overall A$2.5 million loan facility, A$1.69m has currently been drawn down. The loan is secured against Elk and all its assets.
‘Metgasco is disappointed that this opportunity has not been successful and will continue seeking means to realise value from its Clarence Moreton Basin exploration acreage and identifying opportunities outside of NSW,’ the statement by Metgasco management said.
The company’s woes continued this year with its finance director, who had been with the company for only a year, quitting in January.
CSG opponents unite
Meanwhile, the return of the Santos donation by NSW Labor is not good enough for Greens MP Jeremy Buckingham, who yesterday called on NSW leader Luke Foley to ‘pressure [his] federal colleagues to return over $90,000 in donations they have received from Santos over the past two years if they want to restore any credibility’.
And last week, the Christian Democrats announced they would join the Greens in supporting a five-year moratorium on CSG mining because of concerns over the industry’s impact on health, agricultural land and water catchments.
The Lock the Gate Alliance has challenged the coalition to match Labor’s promise of a major CSG moratorium.
Lock the Gate Alliance spokesperson Phil Laird said premier Mike Baird and his coalition were ‘increasingly isolated in holding out against the moratorium’.
‘At the last election, the coalition promised rural communities that it would stand with them with stronger protections against the threat of coal seam gas and fracking,’ Mr Laird said.
‘It’s not too late in the final two weeks of the election for the Baird government to do the right thing, call a halt to rampant coal seam gas and deliver lasting reform of coal seam gas in NSW.
‘Labor’s moratorium commitment is welcome, but the detail of their promises for communities facing immediate threat is not clear. People in Gloucester, Camden and Narrabri need certainty that the next NSW government, whoever they are, will act immediately to address the threats these communities are experiencing and facing.
‘The enormous groundswell of discontent must be addressed and statutory protections put in place not just for future coal seam gas, but where the threat and the impact is happening now,’ Mr Laird said.
Toxic chemicals found in urine
Meanwhile ,a north coast supporter of the anti-CSG campaign in southeast Queensland has slammed Metgasco CEO Peter Henderson for telling media this week there were ’absolutely no health concerns’ over CSG.
Clunes resident Anne Thompson told Echonetdaily that a fundraiser held at the Lismore Workers Club in 2013 for the health testing of children from Tara in southeast Queensland, where the CSG industry is booming, raised $12,500.
Ms Thompson said urine tests last year of Tara locals of all ages showed up levels of various toxic chemicals used in the controversial ‘fracking’ of coal seams for gas.
‘If Peter Henderson think the above levels of these terrible chemicals in children and their parents and grandparents is of no concern, then he either needs to do more research or he simply does not care,’ Ms Thompson said.
‘The National Party has shown their contempt for the electorate by renewing PEL 445 which covers the huge area that includes Lismore, Coraki, Woodburn, parts of the Clarence Valley, Clunes, Bexhill, Eltham, Dunoon, Nimbin, The Channon, Kyogle, Urbenville, Tabulam and Mallanganee, plus water supply areas including Ballina, Byron Bay, Lismore.
‘This licence has now been purchased by multinational operator AJ Lucas which is based just across the border in Queensland where they are extremely active.
‘This is is a huge threat to all of us who fear our area being turned into a gasfield where children and their families will suffer so much.
Ms Thompson urged people not to vote for the Nationals at the election, as it was ’a vote for coal seam gas’.
Related story: https://www.echo.net.au/2015/03/greens-pressure-labor-to-return-mining-donations/