The proposed $8.8 billion cash takeover offer for Caltex Australia from Alimentation Couche-Tard has been thrown into heightened uncertainty by the rout in oil prices that has undermined share prices and further obscured the outlook for the fuels sector.

A 15.5 per cent plunge in Caltex’s share price on Monday morning to as low as $27.20 opened up a gap of almost 30 per cent with Couche-Tard’s suggested $35.25 a share offer, which has already been raised twice. Couche-Tard’s own shares fell 3.6 per cent on Friday, before the worst of the oil price collapse.

With no deal agreed, the Canadian convenience retail giant is free to walk away without penalty, potentially to return at a later date at a lower price, sources suggested.

Still, a strategic buyer such as Couche-Tard, whose offer is not dependent on external financing, should be able to look through the near-term volatility of the market, they added.

Caltex’s second suitor, UK-based EG Group, is still sitting on the sidelines, its initial cash-and-scrip bid having been deemed by the target’s board last week as too low to earn it access to its accounts.

EG’s bid would be reliant on debt funding and so would be more difficult to pull off in the current volatile market, sources said.

Despite the lack of progress on EG’s bid, the Australian Competition and Consumer Commission last Friday kicked off an inquiry into the deal given EG’s existing ownership of Woolworths’ Australian petrol station network. Caltex supplies several third-party sites with fuel, including EG’s network.

Refining is relatively insulated from the oil price crash compared with oil producers, while convenience retailing is regarded as a defensive sector within the uncertain economic climate. But the external factors remain relevant just as the COVID-19 virus is spreading, analysts say.

“While refining should be defensive in a falling oil price environment the decline in demand at the same time makes these stocks less defensive than they would normally be,” Bernstein energy analyst Neil Beveridge said of refiners generally.

The timing and pricing of asset sales can prove more challenging amidst weak oil market sentiment.

— Saul Kavonic, Credit Suisse energy analyst

The crude oil price should make no difference to Caltex essentially, but the oil price crash and the virus epidemic has made the world a much less certain place than back in October when Couche-Tard first approached Caltex, a Sydney-based analyst said.

Still, if Couche-Tard walked away, the risk was it might not be let back into the data room a second time, the analyst added.

Neither Caltex nor Couche-Tard could comment.

M&A deals being targeted in the oil and gas production sector are also expected to be much more difficult in a volatile and unpredictable oil price environment.

Woodside Petroleum, Santos and Oil Search are all targeting asset sales for this year, with Woodside seeking a buyer for a stake in the Scarborough and Pluto-2 LNG project, Santos driving towards a sell-down of its Barossa gas and Darwin LNG interests and Oil Search seeking to sell a stake in its Alaskan oil project.

“The timing and pricing of asset sales can prove more challenging amidst weak oil market sentiment, regardless of long-term fundamentals,” said Credit Suisse analyst Saul Kavonic.

A slew of other potential energy asset sales are also on the table and may be affected by the oil price plunge, including infrastructure at Shell’s QCLNG project in Queensland, Mitsui’s stake in the BassGas project off Victoria and a stake in Thai oil player PTTEP’s Cash-Maple gas project off the north-west coast.

Extracted from AFR