AWE Limited (ASX: AWE) made an announcement to the Australian Stock Exchange this morning that it had received an unsolicited, indicative, conditional and non-binding proposal from Lone Star Japan Acquisitions.

The proposal from Lone Star was to acquire all the shares in AWE Limited for a cash consideration of 80 cents per share. Despite the fact that this offer represented a 29% premium on its last close price, the AWE board met to consider the proposal and decided to reject it.

AWE’s board has called the proposal “opportunistic” and doesn’t believe it reflects the fair underlying asset value of the junior energy producer.

Lone Star Japan Acquisitions is the Japanese side of US-based private equity firm Lone Star Funds. Lone Star has sixteen private equity funds with aggregate capital commitments totalling over US$65 billion.

The share price has soared by over 16% to 72 cents since the release of the announcement, with many no doubt speculating that Lone Star could be back with an improved offer in the future.

I’m not surprised that Lone Star was attracted to AWE Limited considering the great work the company’s management has done so far this year. AWE has gone from having almost $170 million of debt on its books at the end of its last fiscal year, to having no debt and a net cash position of $52 million today.

Despite the rise in its share price today, shareholders are still sitting on a paper loss of around 50% in the last 12 months. But management’s rejection of this proposal is an indication that it believes the share price has much further to climb, which should bring some comfort to long-term shareholders.

For me, AWE Limited is clearly a very tempting investment with a lot of positives going for it right now. But the volatility of commodity prices makes this a high risk investment in my opinion. A steep fall in the oil price again could quickly change things and scare off any would-be suitors.

Investors looking for exposure to the energy sector could consider making an investment in Caltex Australia Limited (ASX: CTX) instead. I believe Caltex is on the cheap side currently, with strong growth prospects over the next few years that will allow it to outperform the S&P/ASX 200 (Index: ^AXJO) (ASX: XJO).

Alternatively, investors could look to this exciting tech share which I believe could provide returns far in excess of either of these two companies. It is definitely worth a look at today as far as I am concerned.

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Motley Fool contributor James Mickleboro has no position in any stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.