PERTH (miningweekly.com) – New York-listed Magnum Hunter said on Wednesday that it would not be increasing its offer for Ambassador Oil and Gas after a change to the Cooper basin exploration programme had lessened the attractiveness of the company as an acquisition target.

Magnum Hunter would stick to its offer – set to close on August 22 – of one of its own shares for every 23.6 outstanding ordinary shares in Ambassador, rivalling a bid from ASX-listed Drillsearch Energy, which is offering one of its own shares for 5.4 Ambassador shares and 5c cash for every Ambassador share.

Magnum Hunter said the extension of work over an exploration field in the Cooper basin, which is one of Ambassador’s primary assets, was a “significant disincentive” to acquire the company at the moment.

Magnum Hunter holds a 17% interest in New Standard Energy, which is partnered with Ambassador in a petroleum exploration licence in the Cooper basin, in which Ambassador owns a 47.5% share.

The South Australian state government recently granted New Standard a six-month suspension on its work programme over the exploration licence, and a one-year deferral on a seismic programme, which moved the targeted completion date of the exploration licence back about 18 months, from September 2014 to March 2016.

New Standard said it would use the postponement of its exploration obligations to plan and enhance the exploration programme to start drilling in year two of the programme.

Magnum Hunter explained that its initial takeover bid for Ambassador, to a large extent, had been to increase its exposure and participation in the Cooper basin exploration, with the previous work programme expected to progress much more rapidly than the one currently on the cards.

“The postponement of the work programme has lessened the attractiveness to Magnum Hunter of an immediate acquisition of Ambassador. Accordingly, Magnum Hunter does not presently believe that an increase in its tender offer price, or a restructuring of its takeover bid for Ambassador, is justified at this time,” the US firm said.

Magnum Hunter turned to the Australian Takeovers Panel after Ambassador’s nonexecutive chairperson David Shaw, and MD Guistino Guglielmo, who collectively held 26.43% of the company’s shares, accepted the Drillsearch offer.

Magnum Hunter’s CEO and chairperson, Gary Evans, said that while the company was pleased with the Takeovers Panel decision, which ordered Drillsearch and certain Ambassador directors and shareholders to unwind their acceptances, the principal considerations underlying the US firm’s bid for Ambassador had now changed.

“We continue to believe our offer for Ambassador has significant strategy merit, specifically with respect to the potential control of the exploration and development of the exploration licence through both New Standard and Ambassador. However, the recent postponement of New Standard’s exploration obligations in respect of the permit is a significant disincentive to us with respect to an immediate acquisition of Ambassador for a consideration greater than our current exchange offer ratio presently reflects.”

Evans said that Magnum Hunter also believed that the current common stock price greatly underestimated the value of the company and its future growth prospects.

“Therefore, at present time, we are not adjusting our current exchange offer ratio to increase our consideration for Ambassador as such adjustment would be unattractive to Magnum Hunter’s existing stockholders.”