UPDATE: Dart Agrees To Buy Apollo; Deal Values Target At A$150 Million

Dart Energy Ltd. (DTE.AU) said Tuesday that it could be selling gas to the New South Wales state domestic power market by 2012 after it unveiled a friendly share-based takeover offer for Apollo Gas Ltd. (AZO.AU) that gives the target an enterprise value of about A$145.5 million.

The offer values Apollo's shares on issue at A$71.4 million but an Apollo spokeswoman said Apollo also has 109.6 million shares subject to escrow and cash on hand of A$12.0 million.

The acquisition will give Dart its first material interest in an Australian asset, adding to its undeveloped coal seam gas acreage in China, India, Vietnam and Indonesia, and follows the company's spin off from Arrow Energy earlier this year.

Australia's large coal endowment has contributed to its status as the world's biggest carbon emitter per head of population but increasing public concern about climate change is strengthening the investment case for natural gas.

Dart, which already owns 21% of Apollo, is offering three of its shares for every four Apollo shares, or about 79 Australian cents per Apollo share, based on their most recent value before the deal was announced.

Apollo directors and major shareholders representing 54% of the company's shares on issue intend to accept the offer, Dart said.

Dart Chief Executive Simon Potter said Apollo's gas fields are close to existing power generation infrastructure, minimizing development expenses and helping to make first gas sales possible by 2012 if planned exploration and appraisal drilling proves successful.

Dart's parent Arrow and its coal seam gas assets in Queensland state were bought by Royal Dutch Shell Plc (RDSB.LN) and PetroChina Co. (PTR) for A$3.44 billion to fuel the pair's proposed liquefied natural gas plant there.

Potter said Apollo's gas, in the far more immature New South Wales coal seam gas market, could possibly be fed into a proposed LNG plant in that state or in Queensland state. "We'd have initial targets to get gas into power as soon as possible but following on later, the portfolio offers sufficient optionality for scale to put gas into a pipeline north," Potter said.

Dart may consider listing its offshore assets separately through an initial public offering of shares once the Australian business "reaches critical mass", Potter said, without providing a specific timeline.

He reiterated that Dart will consider launching an equity raising within the next 12 months to fund its exploration program.

-By Ross Kelly, Dow Jones Newswires; 61-2-8272-4692; [e-mail]