Anzon is offering one share for every two Nexus shares.

The bid offered greater certainty to Nexus shareholders and the alternative was “continued dilution by the Nexus board”, according to Anzon.

“Anzon is offering Nexus Energy Limited shareholders the opportunity and benefits of becoming part of a profitable production company that has the financial capacity to help develop Nexus’s exploration areas and to reduce risk,” the company said yesterday.

“Anzon has demonstrated offshore oil and gas development and production expertise, in contrast to Nexus’s unproven ability to bring offshore assets into production.”

Anzon executive chairman Steven Koroknay said the recent split share placement by the Nexus board was symptomatic of the company’s repeated need for cash.

Nexus shareholders who had been excluded from the heavily discounted initial placement last month at 47c were justified in questioning whether the Nexus board has divided its shareholders into haves and have-nots, according to Koroknay.

“The latest offer to partly include minorities in a separate offer to take up shares with a cap of 8,000 shares at the higher, re-priced, placement price of 62c, which is nearly 32% higher than the price paid by the favoured few on 24 March 2006, will leave a sour taste in the mouths of many shareholders, a number of whom have contacted us to complain about the way in which Nexus has managed its capital-raising activities,” he said.

“Rather than a regime where the Nexus board is using selective placements to favoured investors to fund an uncertain exploration program, the Anzon board is offering Nexus shareholders the prospect of immediately becoming part of a larger entity with revenues and profits to help fund that program.”

In less than 18 months since listing on the ASX, Anzon under its current board and management has produced, as operator, over the last six months more than 750,000 barrels with its joint venture partner Beach Petroleum. In the second half of 2006, Anzon expects to increase output to 25,000 bbls a day with the move to full field production.

In its bidder’s statement, Anzon is forecasting more than $100 million in revenue for 2006 and in excess of $300 million in revenue for 2007. Koroknay contrasted this with Nexus’ record.

“Nexus has a poor exploration record, evidenced by the fact that after more than three years under the current board and management, it has no reserves, no production and hence no meaningful revenue,” he said.

Nexus was bearing 100% of the risk for a complex and costly drilling program to appraise its Longtom prospect, according to Koroknay.

“It is highly unusual for an exploration company, let alone one as small as Nexus, to take all the risk, and in our opinion is not consistent with sound risk management in the oil and gas industry,” he said.

“Esso-BHP relinquished the acreage after drilling Longtom-1 and Apache was not prepared to risk further expenditure after unsuccessful results from drilling Longtom-2. Further, Nexus could not find a partner to share the risk of drilling Longtom-3. All this does not augur well for Nexus’s prospects.”

However, Nexus had argued that Apache’s withdrawal from Longtom was based on misinterpretation of test results.

A second drill stem test on the Longtom-2 well did not flow hydrocarbons to surface, seemingly indicating reservoir damage.

Nexus went over the data and soon concluded that the test had not been conducted properly because a down-hole test valve remained closed throughout the test – the well did not flow because a shut valve would not let it flow.

Apache stood by the test results and turned its back on the well.

But Nexus backed itself and went sole-risk with Longtom, securing all of field development in what could be a company-making move or a costly mistake. The proof will be in the results from the Longtom-3 well.

Based on published information from Nexus, the company will require capital expenditure of $527 million to fulfil its appraisal and possible development requirements. Its net cash position after the current fund raising, depending on shareholder approval, appears to be about $55 million, of which as much as $40 million will be required for Longtom-3, according to Anzon.

However, good results from Longtom-3 will trigger a gas supply contract with Australia’s third-largest petroleum company Santos and probably lead to Santos farming-in to Longtom. Poor results will see the Nexus share price plummet and could well lead to a takeover by Anzon or another company.

Koroknay said under the Anzon offer, Nexus shareholders would receive a substantial premium for their shares, including a premium to the recently re-priced Nexus placement, which was still subject to shareholder approval.

The Anzon offer of 64.5c a share, based on the closing price of Anzon shares on the trading day before Anzon announced its offer on March 20, represented:

• A 37.2% premium to the 47c at which Nexus board issued shares to favoured, select investors on March 24;

• A 22.1% premium to the volume weighted average Nexus share price over the one month before the March 20 announcement date;

• A 12.2% premium to the closing price of Nexus shares on March 17, the last trading day before the Anzon announcement date; and

• A 26.7% premium to the volume weighted average Nexus share price over the three-month period before the Anzon announcement date.

Nexus managing director Ian Tchacos, however, has argued that the Anzon offer undervalued the growth potential of Nexus’ assets.

Anzon was a one-asset company looking to ensure its long-term future by grabbing Nexus’ prospects, according to Tchacos.

“Anzon has made it clear they need the growth inherent in our assets, and it is not surprising that Anzon is seeking to capitalise on the value gap between their offer price and the value potential of the Crux, Longtom and Echuca assets,” he said late last month.