While not part of the Santos-operated South Australian Cooper Basin Joint Venture with Origin Energy and Beach, Senex has plenty of shared assets with both Beach and Drillsearch.

However, it's the metrics that leads Argonaut oil and gas research analyst Philipp M-O Kin to believe Senex will be first target in any growth strategy, if it gains the backing of Seven Group Holdings.

SGH holds a combined 19.2% stake in both Drillsearch and Beach and is widely rumoured to own a small stake in Senex. SGH has also seen the value of its Cooper Basin investments slump with energy prices.

While Beach CEO Neil Gibbins, who took over when Rob Cole left for personal reasons, said he had "no idea" what SGH's attitude to the deal was, he added that "I'm sure they're looking at the metrics of the deal and the IEA (International Energy Agency) like everybody else".

Meanwhile, M-O Kin told Energy News: "You have the kingmaker, Seven Group Holdings, with 19.9% in both, so it feels very much like an arranged marriage."

The merger should be completed in late February 2016, with $1.25 Beach shares for each Drillsearch share, which gives an implied value to of 83c/Drillsearch share.

The deal means Drillsearch shareholders get the benefits of the upswing "when it arrives", Beach chairman Glenn Davis said. Drillsearch shareholders will own 30% of the combined group.

Beach is also prioritising its hunt for a new CEO to head the combined entity, and is consulting Drillsearch in that process.

There is potential for approval to be required by Beach shareholders in relation to Seven Group Holdings' shareholding in both entities, as the deal also includes Beach acquiring all SGH's shares in Drillsearch, whose shareholders will meet in late January to approve the merger.

Gibbins revealed on Friday morning that his company's four-pillar strategy pointed to an "expectation" that it would chase more acquisitions within the Cooper Basin.

Senex has not yet commented on market speculation on Friday after its stock shot up 7% between Wednesday night and Friday, the period in which Santos announced it had rejected Dubai and Brunei royal family-backed Scepter Partners' $6.88/share takeover bid, and Drillsearch and Beach Energy announced their friendly merger.

Senex's rise was above the general market, with other oilers rising little more than 2%. Senex shot up from 17.5c last Wednesday to 21.75c this morning. Drillsearch shot up 25.95%, leading the ASX in stock rises this morning.

Energy News is awaiting comment from Senex managing director Ian Davis.

"On metrics, the combined company will be on an EV (enterprise value) over 2P of about 11.7. Drillsearch is slightly higher, Beach is slightly lower, so it's about even with the premium being paid," M-O Kin told Energy News.

"I have a sneaking suspicion that Senex could be next, based on the metrics and what Senex is doing.

"If you look at the EV over 2P, Senex is at 1.8, which is ridiculous - either there's something happening at Senex I don't know of - yet - or it would make sense that Beach, knowing that the new entity would use its expensive script to takeover Senex as well. That's my gut feeling.

"It looks like part of a longer-term strategic play of consolidation in the area; and Senex, with no debt, cash reserves and trading at such cheap multiples would be another party acquisition later down the track for the new entity.

"Senex is effectively operating in the same area, so you could have a mini-Santos."

Another intriguing player in the mix is Phil Bainbridge, the Drillsearch non-executive director who will join the board of the combined entity with Beach.

Bainbridge was previously been chief operating officer for Oil Search, another company that has been the subject of a takeover offer in the past month.

At Oil Search, Bainbridge was responsible for safety, operational and the financial performance of all its assets in PNG and overseas, before moving to executive general manager of the company's interest in the $15 billion ExxonMobil-operated PNG LNG project.

That project is seen to be the driving force behind Woodside Petroleum's recent overture for Oil Search, and even a major source of attraction for Scepter's rejected $7.14 billion bid for Santos last week.

Bainbridge is still on the PNG Sustainable Development Program board, which prompts the question of whether the Beach-Drillsearch entity could have a crack at Santos's PNG stake, which is on the market.

Beach also has previously expressed an interest in returning to PNG.

Eastern vision

However, the new Beach-Drillsearch entity is more likely than anything to look east in its growth strategy, which is where the case further strengthens for Senex to be the first target of the newly formed group.

Although, Cooper Energy, with its Cooper oil and Gippsland Basin gas interests could also be a logical choice.

Gibbins said last Friday that the merger reinforced Beach's stated goal of becoming the leading ASX explorer and producer, with a combined area of about 69,000sq.km across the Cooper-Eromanga Basin.

The new entity will be heavily weighted towards oil, as, based on June 30, 2015 numbers, it will produce $978 million in revenue as it trades off operating cash flow of over $300 million, and would be producing 12.1 million barrels of oil equivalent, a 7.2MMbbl of this would've been oil with gas and gas liquids making up the balance.

"We believe there are plenty of opportunities in the marketplace" for growth, Davis said.

At 7.2 million barrels, the combined entity (Beach 4.5MMbbl, Drillsearch 2.7MMbbl) will have more than double the production from the Cooper and Eromanga basis than Santos (3MMbbl) and Senex (1.4MMbbl).

Drillsearch chairman Jim McKerlie said there merger also represented a diversification away from the company's predominantly oil focus, and it makes us a more balanced multi-basin oil and gas portfolio.

The combined group will have 4.8MMboe gas and gas liquids production, on FY2015 figures.

More than 90% of Drillsearch's 2014-15 production is in JV with Beach, with the latter operating both the Western Flank oil (40%) and Western wet gas (50%) projects.

This joint venture has also enjoyed annual exploration drilling success rate on 3D seismic of 30-40% in recent years, and they have adjacent shale gas plays in the Nappamerri Trough.

Gibbins said the new business would comprise a 20% interest in about 6000km of flowlines, the Moomba facilities with daily gross processing capacity of 375 terajoules of gas, 35,000bbl of oil and condensate and 600 tonnes of LPG.

It also gives the combined company an interest in the Moomba to Port Bonython pipelines with daily capacity of 48,000bbl oil and gas liquids, and gas storage capacity of about 75 petajoules.

The importance of all this, Gibbins said, was that it provides the ability to service future growth and benefit from potential third party tolling opportunities.

"Being the Cooper Basin's second largest gas producer, the merged entity will also benefit from increasing east coast gas demand," Gibbins said.

McKerlie, who will join the board of the new entity, conceded that his company had refocused on the Cooper Basin under previous managing director Brad Lingo, however, he said the belief now was that "there is more to the world, and as we want to grow, there may be opportunities that take you out side of the basin - and the east coast gas market is one where that could be services from outside of the basin".

In this regard, Senex, which also has some Surat Basin assets, which will likely be linked to the Queensland CSG-LNG markets, is a likely target.

"We have the horsepower to go and look at serious opportunities outside [the Cooper Basin]. That is what is compelling about this merger," McKerlie said.

On the front foot

While Gibbins initially tried to water down any immediate moves on the M&A front, he then went on the front foot about either Beach or the new entity gunning for further growth through M&A.

"One of our strategic pillars is to optimise our core in the Cooper Basin, and we see this transaction as a very strong plank in relation to that. Whether further consolidation can occur I can't say, but the focus now is to ensure the merger is done smoothly," Gibbins said.

Then, when asked whether this meant Beach would "step back" on M&A activity, he replied: "I don't know about a step back. Our focus has to be squarely on making sure this merger is executed properly, but at the same time if an opportunity presents itself, have no hesitation that Beach or the combined entity will make the most of those opportunities if we see value accretion to our shareholders."

McKerlie then added that "one of the key things is to remain agile".

"One can't predict where opportunities come from; but it's very important we get on with the business of getting combined, then we have the wherewithal and the firepower so that if any opportunity comes up we can move quickly on it," he said.