Potential M&A in the Cooper Basin

We believe that a merger of BPT and DLS is more likely following the departure of DLS MD Brad Lingo last week. Seven Group (SVW) has bought 19.9% in both BPT and DLS over the last six months, at a cost close to $400m. Seven is keen to see consolidation of these Cooper Basin focused stocks, and some synergies are obvious. BPT operates DLS’s most valuable asset and combined corporate overheads could be cut from $50mpa to $30m, or less in our view. We believe Mr Lingo was opposed to a merger with BPT, and his departure will make any discussions between the two companies easier. We can only imagine a scrip merger, as cash conservation is king for oil and gas companies at present, but DLS should get the more favourable terms, as the smaller company being acquired by its Big brother BPT. We recommend a Hold on DLS (VIEW LINK) and Sell for BPT (VIEW LINK).

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