Shell out of Cove bid..

[admin]

From the FT

Shell / Cove: we’re out
July 16, 2012 4:06 pm by Rob Minto

After a bidding war that has gone on almost all year, Shell has on Monday stepped out of the bidding war for Cove Energy. Which means the winner of the battle for the London-listed company is PTT of Thailand. The market was expecting a showdown, with shares opening on Monday at 278 pence, but as soon as Shell threw in the towel, they plunged and closed 14 per cent down at PTT’s offer price.

For those not familiar with the soap-opera-like fight for Cove – which owns an 8 per cent stake in a big Mozambique gas field – beyondbrics has a quick history.

Firstly, the details: PTT’s last bid was 240 pence a share, valuing Cove at £1.2bn ($1.9bn). Shell had until Monday afternoon to raise its offer, which would have triggered a sealed-bid auction. But no such drama – the company simply said in a statement that “Shell Bidco has today decided not to revise its offer of 220 pence in cash for each share of Cove, and not take part in the Auction Procedure for Cove.” And that’s that.

Here’s the history:

December 16 2011: Cove Energy considering asset stake sale

February 24 2012: Shell boosts Mozambican Asian ambitions | PTT launches counter-offer for Cove | The initial bids start to come in.

February 28: Indian consortium set to table Cove bid

April 24: Shell makes £1.1bn cash offer for Cove
PTT still in running, along with two Indian groups. Cove recommends Shell bid to shareholders.

May 15: Cove’s gas find could fire up the bids
A new gas discovery makes Cove an even hotter target.

May 23: PTT swoops with higher bid for Cove
The bid goes to 240p – Cove switches recommendation to PTT.

June 14: Shell extends deadline for Cove bid
Shell keeps its options open

June 28: Shell extends £1.12bn bid for Cove Energy
But the clock is ticking…

July 9: PTT extends deadline on Cove bid
Thai group push back deadline to July 13

July 12: Shell extends offer for Cove Energy
Looks like we’re going to auction…

July 16: Shell pulls out

[admin]

What will they do next? Any other gas resources available that we know off?

[jake990037]

Anadarko has a far larger part of the field than Cove off Mozambique, plus other East and West Africa and GOM holdings. That's actually my guess for where Shell will go next. Some analysts have speculated on that being Shell's next target.

What will they do next? Any other gas resources available that we know off?

[Justin94360]

From yesterday's Sunday Times:

Inside the City: Shell in D-day to land Cove Energy
After a six-month takeover saga, the chief of Royal Dutch Shell has a decision to make: bump up its bid for Cove, or retreat

MUCH fretting this weekend inside the Shell Centre, the London headquarters of Royal Dutch Shell. For the past six months the oil giant has been locked in a takeover saga. The end, finally, is nigh, and chief executive Peter Voser has a decision to make.

In February, he lobbed in a bid for Cove Energy, an explorer that found the giant Rovuma gas field off the coast of Mozambique. From nowhere, PTT, Thailand’s state oil group, emerged with a richer offer. Both have taken their bids to investors. Neither has got very far.

Indeed, PTT, whose bid values Cove at 240p a share, or £1.2 billion, has drummed up “yes” votes from less than 1% of shareholders. The Takeover Panel has called time on the shenanigans. It has given Shell until 4.30pm on Tuesday to either bump up its bid or retreat. PTT then has 24 hours to respond.

It is a bizarre situation in which the only clear winners will be Cove’s shareholders.

The company, launched on a shoestring, floated at 20p in 2009. On Friday it closed at 276p, 15% better than the Thais have offered. Clearly, investors are betting Shell is going to dig a bit deeper.

But it is a dangerous situation for Shell. Virtually all of Cove’s value is in an 8.5% stake in the Rovuma field, which has enough gas to supply Asian customers for decades.

Cove is a foot in the door of the huge project. Shell, however, won’t stop there. It wants to increase its stake to as much as a third, and possibly take control of the multi-billion-dollar development. So whatever price Cove ends up going for will set the floor from which its partners in Rovuma will start their negotiations. In other words, Shell is in danger of bidding against itself in the future.

Anadarko Petroleum, the American driller, holds the largest stake at 37%. Videocon and Bharat Petroleum, both of India, are also likely sellers. For now, they are standing gleefully by while PTT and Shell slug it out.

Cove, however, is not the only option. I understand Shell has begun talks with Anadarko — it could buy a stake and get in through the side door even if PTT wins. PTT’s rationale, meanwhile, is difficult to understand.

The deal is driven by the country’s desire for energy security. Cove’s measly 8.5% of Rovuma would increase Thailand’s gas reserves by a whopping 50%. Yet there is no guarantee that the country would receive the gas. Any supply deals would have to be negotiated at arm’s length with PTT’s sister trading company.

Which begs the question: what does £1.2 billion buy the Thais aside from a hedge on future price rises?

Whoever ends up buying Cove is really purchasing an obligation to spend billions to bring the big find into production. That is not of concern to Cove investors. They are already looking at a very healthy return since Shell kicked off the bidding at 195p. Except for the hedgies who have bought in hoping for one last flurry of action, anything beyond 240p will be gravy.

And who knows, Shell could break the bank. It has form. It splashed out for Enterprise Oil a decade ago, Duvernay Oil in Canada in 2008, and Australia’s Arrow in 2010. With the benefit of hindsight, all of the above look . . . generous.

danny.fortson@sunday-times.co.uk

[admin]

Thanks for that article, Justin

[TxPm]

Looks like Shell didn't waste much time:

http://mobile.businessweek.com/news/2012...after-cove