Topic: Shell to buy Cove Energy for $1.6 bln

Shell to buy Cove Energy for $1.6 bln

Tagged: Shell Buys Cove for offshore assets

This topic has 8 voices, contains 25 replies, and was last updated by ebster123 79 days ago.

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February 22, 2012 at 3:25 am #7819
Justin94360	LONDON, Feb 22 (Reuters) – Royal Dutch Shell Plc has made an agreed 992.4 million pounds ($1.6 billion) bid for Mozambique-focused Cove Energy, offering a full price to open up a new gas frontier for the Anglo-Dutch oil major in East Africa. Shell has offered 195 pence per share in cash, which Cove’s directors said on Wednesday they would recommend to shareholders. On Tuesday, Cove’s shares closed at 154.5 pence, and analysts at Citigroup said the “valuation looks stretched” in a research note. The price is an over 70 percent premium to Cove’s closing share price on Jan. 4, when Cove announced plans to sell, although investors were already betting on a bid at that point. Cove’s main asset is an 8.5 percent stake in the Rovuma Offshore Area 1, in Mozambique, where operator Anadarko has found over 30 trillion cubic feet of natural gas. Nearby, Italy’s Eni has also made major gas finds while, north of the maritime border, Norway’s Statoil has made a find in Tanzanian waters. Shell is the industry leader in freezing natural gas into liquefied natural gas (LNG) for export in tankers around the world, and so a presence in what is expected to emerge as one of the world’s major LNG provinces is a logical step. However, some bankers had questioned whether Cove’s stake alone would make sense for an oil major like Shell. Big oil groups like to have material stakes of over 25 percent in projects. In addition to Anadarko, Japan’s Mitsui and Indian groups Bharat Petroleum and Videocon own minority stakes in the Rovuma license, and the values of these interests could now be marked up. Cove also has interests in Tanzania and Kenya. Morgan Stanley advised Shell on the bid, while Standard Chartered advised Cove. ($1 = 0.6321 British pounds) (Editing by Mark Potter)
February 22, 2012 at 3:37 am #7820
Justin94360	Here is a link to Maquarie report from last year: http://www.cove-energy.com/communicraft-cms-system/uploads/Macquarie_initiation_12-05-11.pdf Shell certainly aren’t worried about FID’s here – still 2 years away (without delays). “The crux of our Outperform recommendation is a firm belief that Cove has now discovered sufficient gas resources to justify a liquefied natural gas (LNG) development. However, we do not expect a final investment decision on the project until end-2013 with a multi-rig exploration and appraisal campaign planned from 2H 2011 to 2013. Our analysis of a potential development scenario implies a Cove RENAV of 161p/sh ($1.3b). Accounting for near-term exploration and appraisal we set a price target of 150p/sh.”
February 22, 2012 at 5:02 am #7821
Justin94360	“main asset is 8.5% of 12 TCF!!!” Market cap is roughly $1.5bn “Cove is an East Africa focused independent E&P company and its main asset is an 8.5% interest in Area-1 offshore Mozambique where we believe at least 12tcf of natural gas has been discovered over the last 15 months.”
February 22, 2012 at 7:17 am #7823
jft310	Justin. One might conclude this is why IOC is drilling T-2. More NG!Removes any uncertainty over does IOC have enough NG.My take is for what size LNG operation? Eight mtpa or 10 mtpa. If Knowledge Reservoir is correct and our Pet nails another one then IOC will add more NG to E/A.Using GLJ numbers then E/A is 8 plus T’s and Knowledge is 4 T’s well we get to 12 T’s with a 58% ownership not an 8.5% ownership.Then theres Dave Hollands take T-2 is 2-4 times E/A. We wait.
February 22, 2012 at 7:59 am #7824
ebster123	This adds even more credibility to the thought that the current delays are IOC holding out until T2 has shown its potential and not one of the SMs. Seems the SMs would love to jump in at a discount before T2 true value is identified. We shall see very soon.
February 22, 2012 at 8:39 am #7825
jft310	Game of High Stakes Chicken is my take. Phil has stated on CC x price before drilling and Y (higher) price after drilling. We are drilling.Phil I think is very confidant of positive results at T-2 and Knowledge Reservoir and Pet seem to agree.Phil has 4 aces is my take.
February 22, 2012 at 9:05 am #7827
Tree	We drill, who will be happy? 12Ts and production facilities working on 14.5% royalties of sales gas,makes the facilities happy, and SK’s KOGAS eyeing plants/operation. 12Ts and upstream owned by upstream partners makes Japex/Mitsui very happy as they eye upstream opportunities. SM’s would prefer to steal the whole thing prior to drilling…..oooops, Shell tried that.
February 22, 2012 at 9:05 am #7828
ebster123	I agree, however, a SM can not yell call. If the reservoir at T2 is at least as large as Pet and others suggest (or larger) then any SM who wants in has to pay. While I have not agreed 100% with all IOC’s managements decisions in the past I agree with this move. Seems like Phil has a very good hand here and he also knows how to count cards. Could be if this were a casino in Vegas they would not allow him to bet anymore!! Looking forward to beginning of March!
February 22, 2012 at 9:32 am #7831
Palmtok	The other point to note with this Cove asset is that it is OFFSHORE. IOC is 100% ONSHORE. I think Tusk said something last night about onshore assets. Oh yeah, they are CHEAPER cost-wise to develop. Now that’s worth something, let alone being located much closer to Asia. Advantage IOC!
February 22, 2012 at 10:31 am #7841
Getitrt2	It appears to me with a quick calculation that $1.6 billion for 8.5% of 12 Ts equates to about $11 billion for 58% of 12 Ts; is that correct?
February 22, 2012 at 10:48 am #7843
Palmtok	That’s what I get getit; $10.92 billion
February 22, 2012 at 11:26 am #7847
Getitrt2	And that’s in excess of $200 per share, with 58% being after PNG buys its share of 22.5%, which it has not done yet, right?!
February 22, 2012 at 11:49 am #7848
Palmtok	Yep; about $230/sh
February 22, 2012 at 5:13 pm #7862
Putncalls	According to the article Shell bought 8.5% of 30 Ts? “Cove’s main asset is an 8.5 percent stake in the Rovuma Offshore Area 1, in Mozambique, where operator Anadarko has found over 30 trillion cubic feet of natural gas.”
February 22, 2012 at 8:00 pm #7869
Getitrt2	I was going by the quote from Macquarie above, a contradiction I don’t know the answer to. Hard to believe it’s changed that much, and there probably are no independent resource estimates yet.
February 22, 2012 at 8:32 pm #7870
jft310	Not just resource estimates, its signed 4 of em offtake deals,its FID ready project for 8 mtpa,its 12 reef potential with seismic to show bidders,its drilling in an already drilled area for NG with seismics that show 2-4 times possible NG at this site vs E/A.And most important its E/A,its size and where its located.
February 23, 2012 at 2:45 am #7872
Justin94360	Sorry, it seems that Maquarie report is out of date and they upgraded their estimates to up to 30Tcf around Nov 2011.
February 25, 2012 at 1:48 pm #7951
Justin94360	“Analysts think the bid for Cove could be the first of many similar deals as larger companies such as Shell and state oil firms swoop on smaller businesses with prized assets.” Anyone know a ‘smaller business with prized assets’? Shell bid for Cove Energy beaten by Thai state rival PTTEP By Rob Davies Last updated at 11:09 AM on 25th February 2012 Comments (1) Share The trio at the helm of Cove Energy are in line for at least £44million between them, after Thai state energy firm PTTEP blew an offer from Shell out of the water with a £1.1billion bid. Shares in Cove soared more than 20 per cent to 235p, well above PTTEP’s 220p-per-share offer, already a 96 per cent premium to the oil firm’s value before it advertised itself for sale in early January. The surge suggests investors think Shell will return with a sweetened proposal in a fierce tug of war for Cove’s potentially lucrative East African gas assets. Read more: http://www.thisismoney.co.uk/money/markets/article-2106145/Shell-bid-Cove-Energy-beaten-Thai-state-rival-PTTEP.html#ixzz1nQ8cGDcE The Anglo-Dutch firm professed interest at 195p per share this week, in the hope of grabbing Cove’s 8.5 per cent stake in the gas-rich Rovuma prospect offshore Mozambique. More… RUPERT STEINER ON SATURDAY: Corruption on camera MARKET REPORT: Unilever dented by heavy selling Shell wants to use the stake as a foothold to invest more heavily in Rovuma, so that it can cash in on plans to build plants to freeze natural gas for export to energy-hungry Asian markets. Cove founder and chief executive John Craven holds stock and options worth £20.1million based on PTTEP’s offer. If Craven sells up, he will have made himself a multimillionaire in the space of three years, after taking a shrewd gamble on the geology of the Rovuma prospect. Chairman Michael Blaha, formerly Shell’s head of operations in Algeria, is in line for a £15.6million payout, while finance director Michael Nolan could pocket £7.9million. A sale would rack up nearly £44million for the trio, but a protracted bidding war could easily take the combined windfall beyond £50million. Analysts think the bid for Cove could be the first of many similar deals as larger companies such as Shell and state oil firms swoop on smaller businesses with prized assets. Africa-focused Ophir Energy has seen its stock rise on speculation of an offer, while Gulf Keystone Petroleum, which is sitting on the Shaikan prospect in Kurdistan, is another subject of bid rumours. Read more: http://www.thisismoney.co.uk/money/markets/article-2106145/Shell-bid-Cove-Energy-beaten-Thai-state-rival-PTTEP.html#ixzz1nQ8m0PVq
February 25, 2012 at 1:58 pm #7952
Justin94360	New offer equates to $1.77bn or 10% increase on Shells bid.
February 25, 2012 at 4:09 pm #7954
ebster123	This same type of transaction may be just what LNG Energy and New Guinea Energy are waiting for, time will tell.
February 29, 2012 at 12:43 am #8040
Justin94360	Another 10% increase on prior bids sounds imminent with Shell sounding likely to up this as well. New bid from Indian consortium takes it to $1.92bn for 8.5% of 30TCF (no 3rd party verification of this and 2 years away from FID). No wonder Shell wants in on the IOC deal. Indian consortium prepares to enter bidding war for Cove Energy British company has already received offers from Royal Dutch Shell and PTT Exploration of Thailand Richard Wachman guardian.co.uk, Tuesday 28 February 2012 19.29 GMT he battle for control of the world’s natural resources intensified on Tuesday when two state-run Indian companies said they were considering entering a bidding war for Britain’s Cove Energy, which has already received offers from Royal Dutch Shell and PTT Exploration of Thailand. PTT is 65% controlled by the Thai government. A consortium consisting of Indian groups Oil and Natural Gas Corporation (ONGC) and GAIL said they could enter the fray, with sources suggesting they would probably pitch in with a bid worth 245p a share, valuing Cove at around £1.2bn. That compares with Shell’s offer of 195p a share and PTT’s 220p. Assuming a deal can be clinched at the top end, Cove’s chief executive John Craven, chairman Michael Blaha and finance director Michael Nolan could collect nearly £40m. Cove’s suitors are strongly attracted by its main asset, an 8.5% stake in the Rovuma River Basin off the coast of Mozambique estimated to contain 30 trillion cubic feet of gas – equal to nearly half of Canada’s proven reserves. East Africa is tipped to become a major natural gas-producing region that could meet surging demand from emerging economies such as India and China. Cove and its partners plan to build plants to convert Rovuma’s energy into liquified natural gas and ship it to Asia, a prospect that appeals to Shell which has more LNG capacity than any other international resources company. It is eager to exploit its LNG expertise, as well as acquire access to Cove’s assets in Mozambique and Kenya. Far Eastern energy demand is booming with China alone expected to double its use of LNG by 2015 to 30m tonnes a year; India isn’t far behind according to recent research by ICRA, a research and ratings company. Following reports, ONGC confirmed it and GAIL “were currently participating in the formal sale process announced by Cove,” but it added: “At this stage, no decision has been made by the consortium whether to make an offer for Cove or the price at which any such offer may be made.” Shell, which has a market capitalisation of £85bn, and is the favourite in the City to win the bidding contest, said in its offer document that “East Africa is a major prospective hydrocarbon province, which has seen a significant increase in exploration activity in recent years.” It added: “Shell already has interests in Tanzania, and the acquisition of Cove would mark Shell’s entry into exciting new hydrocarbon provinces in Kenya and Mozambique, with significant potential for new LNG from recent gas discoveries off Mozambique, and further complementary exploration positions in East Africa.” Cove is the junior partner to US oil company Anadarko in Rovuma, and other stakeholders include two other Indian companies, Bhasrat Petroleum and Videocon Industries. The Indian bidding consortium’s interest mirrors efforts by Indian steel, power and coal companies to scout for overseas assets to satisfy surging domestic demand. But in the past, Indian firms such as Coal India and ONGC have not been particularly successful in closing large overseas acquisitions and have shied away from bidding wars despite sitting on huge piles of cash. “They are very cautious in their approach and it takes a lot of time for them to get government approvals while their rivals elsewhere make quick decisions,” said Juergen Maiar, a Vienna-based fund manager with Raiffeisen Eurasien Aktien. Shares in Aim-listed Cove, which was only formed via a reverse takeover three years ago, have more than doubled since it advertised itself for sale in early January. Cove boss Craven has an MSc in Petroleum Geology from the Royal School of Mines in London and an MBA from Queens University in Belfast. Any deal must be approved by the Mozambique government. Cove’s shares closed in London up 2.45% at 240p.
February 29, 2012 at 7:05 am #8041
jft310	Justin Let’s use some common sense . If this project has this much interest in their assets then whats the interest in IOC’s project???Reports from third partys state everyone is looking or has looked at IOC’s project with a mind on a bid.Best guess this person a third party states we hear end of March with a success story.The bids they state are robust so far and Cove Energy is but a look into IOC’s future.
February 29, 2012 at 8:01 am #8042
Dr. Wu	“Morgan Stanley advised Shell on the bid, while Standard Chartered advised Cove. ($1 = 0.6321 British pounds) (Editing by Mark Potter)”
February 29, 2012 at 8:12 am #8044
Justin94360	My thoughts exactly. If Shell etc are willing to pay these kind of sums at this stage of their project our bids should be very, very good.
February 29, 2012 at 8:44 am #8045
Tree	“Morgan Stanley advised Shell on the bid, while Standard Chartered advised Cove.” I like seeing the NOC’s of India creating a biddder consortium bidding against Shell….think JKM. I also like the public nature of this bidding. Do we get this public bidding in IOC sale or do we just get the deal bomb announced on the shorts??