While WestSide is offering 20cps for Armour, and wants at least 50.1%, up from its initial 12cps offer, the US-based AEP has taken the rare step of making a counter offer, seeking to acquire 13.62% of each Armour shareholders shares.
The offer, which leaves shareholders such DGR Global exposed to the massive upside in the seven Northern Territory permits that had been offered to AEP as a 75% joint venture partner, comes just days after some promising well results from Origin Energy, Sasol and Falcon Oil & Gas in the Beetaloo sub-basin.
Last week Falcon announced that the second of three wells, Amungee NW-1, encountered the thick Middle Velkerri formation 25km east of the first well drilled, Kalala S-1.
Net pay was calculated at 150m, with total organic carbon estimates range 2.5-5% within the best shale units representing a highly encouraging result in comparison with commercially successful North American shale gas plays.
That joint venture, which is targeting similar plays to Armour and AEP, has decided to bring forward plans to drill a 1000m horizontal well into the Middle Velkerri B Shale by 12 months.
Amungee NW-1H will then be fracced in 2016.
DGR, which has been strangely silent about its position regarding WestSide's revised takeover offer for more than a week, reacted quickly to AEP's counteroffer, throwing its weight behind the proportional offer, saying it will vote its 19.9% stake to support AEP at a planned shareholders meeting to consider the original farm-in on Friday (October 30).
With Armour's directors and DGR backing the AEP proposal, about one-third of Armour's shares are now staked against WestSide.
Armour has entered into a bid implementation agreement with AEP for the proportional transaction, which comes in addition to the original McArthur Basin farm-out and the issue of in aggregate 33.81 million shares and 24 million options to AEP.
DGR says it does not intend to accept the proportional bid given its confidence in the long term value opportunities in Armour.
Following the completion of the proportional bid, AEP is expected to hold up to 14.99% of Armour's shares.
Armour will be cashed up after the deal with more $30 million in cash from APE if the farm-out closes, with additional bonuses to come once EPA 177 and EPA 178 are granted, and if any production licence is granted.
AEP has offered to spend up to $US130 million to earn its 75% interest in Armour in a series of stages. It also has a separate deal with Empire Energy Group over several adjacent areas.
Mather said the new proposal provided long term upside potential for participation in a substantial resource discovery and if successful, potential petroleum developments in the Macarthur Basin.
"We view the Macarthur Basin as having significant potential to define a large scale oil and gas province," Mather said.
"There are similarities to huge oil fields in Siberia, China and Oman in rocks of similar ages and very favourable comparisons to the prolific Marcellus and Utica Shale plays in the US where AEP's management have been very experienced operators.
"AEP's best in class development and production techniques and the focus on these activities in our project areas can provide long term benefits to Armour and its shareholders."
He said the WestSide offer, which Armour's board had previously accepted, was not considered to acknowledge the considerable upside in the Roma Shelf project or Armour's Victorian and other project interests, and the Lakes Oil shares.
WestSide, which has so far secured a little over 2% in Armour, is understood to be assessing the chance in circumstances.
Energy News has contacted WestSide for comment.
