AWE shares jump on takeover bid

Shares in oil and gas group AWE have jumped more than 20 per cent following a $430 million indicative takeover offer from a Chinese state-owned energy corporation.

AWE has a 50 per cent stake in the Waitsia project, located in the Perth Basin, which has been touted as the largest onshore conventional gas discovery in Western Australia for decades.

The company recently reported that testing at Waitsia had achieved an instantaneous maximum flow rate of 90 million standard cubic feet per day , believed to be one of the highest rates recorded onshore in Australia.

AWE on Thursday said its board was considering China Energy Reserve and Chemical Group's 71 cents a share offer but believes it is not high enough to give CERCG access to its books under due diligence.

CERCG Australia managing director Liping Xuan said in a letter to AWE that the Waitsia project had good potential.

"CERCG acknowledges the excellent work AWE has achieved focusing the company on domestic Australian gas," he said.

"We particularly recognise the good work on the Waitsia project.

"CERCG wishes to maintain the momentum for the development of Waitsia."

CERCG has appointed Argonaut as financial adviser, MinterEllison as legal adviser and PwC as accounting and tax adviser.

The offer is well above AWE's Wednesday closing price of 54.4 cents.

AWE's reaction has not prevented the energy company's shares jumping 22 per cent to finish at 67 cents for the day

AWE has appointed UBS as financial and Allens as its legal adviser but adds there is no guarantee the offer will result in a deal.

Beijing-headquartered CERCG is involved in oil and gas exploration, development, storage and distribution.