Little known Westside Corp. Ltd. (WCL.AU) on Wednesday signaled its intention to become a more serious player in Queensland state's booming coal seam gas, or CSG, sector by announcing it has agreed to spend up to A$80 million buying acreage from Anglo American PLC (AAUKY) and Mitsui & Co. Ltd. (MITSY).

The Brisbane-based company, which already explores for CSG in several permits in Queensland's Bowen Basin, said the proposed deal could make it the state's second biggest listed pure-play CSG company.

Over A$20 billion has been spent on mergers and acquisitions over the past two years in Queensland's CSG sector as multinationals turn to alternative sources of fuel as traditional supply declines.

Gas demand in Asia is projected to increase sharply, especially in densely populated China and India, and Queensland is ideally positioned to serve the regional market through liquefied natural gas, or LNG, plants built on its northern coast.

Westside said it has signed a conditional agreement to acquire Anglo American's stake in the Dawson Seamgas CSG assets and may also buy Mitsui's stake in the assets subject to the consideration of preemptive rights.

The deal would result in Westside taking a stake of up to 100% in the producing Dawson Seamgas CSG fields, near Moura in Queensland's Bowen Basin, and up to 50% in two adjoining permits.

It would acquire up to 212 petajoules of proven and probable reserves and 514 petajoules of proven, probable and possible reserves.

"Westside's total acquisition cost is expected to be between A$55 million and A$80 million, depending on the ultimate ownership interest acquired, with a proportional reduction of Westside's investment if Westside seeks to work with a joint venture partner," the company said in a statement.

The size of the acquisition is surprising considering that even the bottom end of the expected price tag is higher than Westside's market capitalization before the deal was announced.

Westside intends to issue new shares to existing shareholders to help fund the transaction but won't provide more details until there's further certainty on how much it will need to raise.

The resolution of various preemptive rights could take up to 90 days, Westside said.

Shareholders looking for another opportunity to buy into Queensland's CSG sector pushed Westside's shares higher. At 0140 GMT, they are up 4 cents, or 8.3%, at 52 cents after rising as high as 56.5 cents.

"The proposed investment has the potential to transform Westside from an explorer only business to a significant CSG producer, with sales contracts in place and a portfolio of exploration projects in various stages of development," Chairman Angus Karoll said.

The assets Westside has agreed to buy are adjacent to its existing Paranui CSG project and currently produce about 12 terajoules of gas per day for the domestic market.

They are also adjacent to the proposed route for the Surat to Gladstone pipeline. The port city of Gladstone is the proposed home of up to five LNG projects.

-By Ross Kelly, Dow Jones Newswires; 61-2-8272-4692; ross.kelly@dowjones.com
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