PERTH (miningweekly.com) – ASX-listed Nexus Energy has warned shareholders that the company would be placed in voluntary administration if a takeover by diversified investment group Seven Group Holdings fell through.

In February, Nexus suspended production at its Longtom gas processing facility, offshore of Victoria, with subsequent investigation revealing an electrical fault in the subsea facilities at Longtom 3.

Gas production from the Longtom-4 well restarted in March, but further investigation was undertaken to determine the cause of the electrical fault and the work necessary to rectify the situation, as well as the time and cost implications this would have.

Preliminary capital expenditure estimates to return the Longtom-3 well to production, with consideration given to a range of options, have been estimated at between A$3-million and A$6-million, depending on the option chosen.

Nexus warned has shareholders that if rectification work was not carried out on the Longtom-3 well, the loss of revenue and the associated implications under the current gas sales agreement would result in a writedown of some A$18-million on the asset.

Furthermore, if the merger implementation agreement with Seven Group Holdings fell through, the company would be required to repay a A$40-million bridge facility provided by Seven Group Holdings, as part of its takeover offer, resulting in Nexus being placed in voluntary administration.

At the end of March, Seven Group Holdings offered to acquire all Nexus’ ordinary shares for 2c each in cash. The investment group has also entered into a conditional agreement to acquire subordinate loan notes issued by Nexus representing more than 66.67% of the aggregate face value of all notes.

The two companies further entered into the A$40-million four-month bridge facility agreement, to provide Nexus with sufficient funding to meet its working cost requirements at the Longtom project, near-term capital commitments and corporate expenses.

The Nexus board had reiterated its recommendation that shareholders accept the Seven Group Holdings offer, adding that the ASX-listed firm had already acquired a 66.67% holding in Nexus.

In the interim, Nexus’ share trade would remain suspended on the ASX.

Meanwhile, Nexus said that based on the current timetable of the merger agreement, the rectification work to the Longtom-3 well would not need to be undertaken until after the completion of the merger. However, Nexus might need to make capital commitments in respect of this rectification work.