AWE shares are soaring after a private equity takeover bid

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Shares in junior energy producer AWE Limited took off today after a $421 million takeover offer from global private equity firm Lone Star Fund.

A short time ago, they were up almost 16% to $0.712.

AWE announced that it received an unsolicited proposal from Lone Star Japan Acquisitions, on behalf of a Lone Star Fund, to acquire all of the shares for $0.80 a share cash.

However, the AWE board rejected the offer, describing it as opportunistic and not reflecting the underlying value of the company.

Lone Star Funds is a US private equity firm specialising in distressed assets.

AWE has appointed UBS as its financial adviser and Allens as its legal adviser.

The oil and gas company has no debt and, as of March, had $52 million in cash.

In its latest half year results, the company reported a 24% fall in sales revenue to $122 million and a statutory net loss after tax of $274 million, including $191 million of non-cash impairments.

Like many resources companies, AWE has been cutting costs and increasing output to try to catch falling commodity prices. Total production for the half year to December was up 12% to of 2.9 mmboe (million barrels of oil equivalents).

In January, AWE sold its 10% interest in the Texas oil shale project Sugarloaf for $US190 million ($A271 million) to Carrier Energy Partners, a Houston-based private oil and gas company.

And earlier this month, AWE said it was selling its 42.5% interest in the Bulu PSC, including the undeveloped Lengo gas project, to a subsidiary of HyOil Pte Ltd for up to $27.5 million cash.

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