PTT Exploration & Production Pcl (PTTEP) expects to face stiff competition from international rivals to acquire U.K.-listed Cove Energy Plc (COV) after it trumped a bid for the African explorer by Royal Dutch Shell Plc. (RDSA)
“The competition is quite high and we are doing our best,” Chief Executive Officer Anon Sirisaengtaksin said in a telephone interview today. “Our offer is based on plenty of studies, including surface evaluation and due diligence, which showed that Cove’s assets are world class and have high potential for discovering a large amount of gas.”
Thailand’s only listed oil and gas explorer on Feb. 24 offered 1.1 billion pounds ($1.7 billion) for Cove. The Bangkok- based company’s proposal of 220 pence for each share was 13 percent more than Shell’s bid. PTT Exploration’s shares fell.
Cove holds 8.5 percent of a block off Mozambique where Anadarko Petroleum Corp. (APC) has found as much as 30 trillion cubic feet of gas. That would be enough to justify production of liquefied natural gas to supply Asian markets. Cove said in a separate Feb. 24 statement the sale process for the company will continue and it reserves the right to reject any approach.
“We think Shell is the Mozambique government’s preferred bidder and will likely raise its offer to 240 pence” a share, said Stuart Joyner, an analyst at Investec Securities in London.
PTT Exploration fell as much as 1.4 percent to 182.5 baht and traded at 184 baht as of 12:30 p.m. in Bangkok. Cove surged 21 percent to 235 pence in London Feb. 24, indicating investors are betting on further bids.
On Feb. 22, Shell bid $1.6 billion to buy Cove to gain a foothold in Mozambique. Jon French, a London-based spokesman for Shell, declined to comment Feb. 24 when asked whether the company would be prepared to raise its offer.
PTT Exploration’s bid values Cove at $4.6 per barrel of oil equivalent of resource and “is already hot in my view,” said Jason Kenney, an analyst at Banco Santander SA in Edinburgh. “I’d be surprised if a Western oil major would pay above this level as it looks expensive. Never say never though.”
East Africa’s fields offer a fresh source of gas supply for Asia, where China and India are the world’s fastest-growing major economies. Eni SpA (ENI) of Italy, BG Group Plc (BG/) of the U.K. and Statoil ASA of Norway also discovered natural gas off Mozambique and Tanzania. Statoil’s Executive Vice President for Exploration Tim Dodson last week declined to say whether Norway’s largest oil company would be interested in joining the race for Cove.
Cove has been working with Total SA (FP) and BG to explore off the coast of Kenya. Last year, it joined Cairn Energy Plc (CNE) to bid for exploration licenses off Lebanon.
Standard Chartered Bank is advising Cove, which put itself up for sale last month. UBS AG is advising PTT Exploration.
The transaction depends on approval from the Mozambique government. The Thai government supports PTT Exploration’s bid.
PTT Exploration has adequate cash flow and can raise funds to finance the acquisition, Anon said.
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