Bloomberg News

Shell Agrees to Buy Cove After Raising Bid to $1.8 Billion

April 24, 2012

Shell raised its offer for Cove to 220 pence a share from an earlier price of 195 pence, matching a rival offer from PTT Exploration & Production Pcl, the company said in a statement today. Photographer: Simon Dawson/Bloomberg

Shell raised its offer for Cove to 220 pence a share from an earlier price of 195 pence, matching a rival offer from PTT Exploration & Production Pcl, the company said in a statement today. Photographer: Simon Dawson/Bloomberg

Royal Dutch Shell Plc (RDSA), Europe’s largest oil company, agreed to buy Cove Energy Plc (COV) after raising its bid to 1.12 billion pounds ($1.8 billion), securing a stake in gas fields discovered off Mozambique.

Shell increased its offer for Cove to 220 pence a share from 195 pence, matching a rival proposal from Thailand’s PTT Exploration & Production Pcl (PTTEP), the Hague-based company said in a statement today. The board of London-based Cove has agreed to the Shell bid.

The African explorer put itself up for sale in January after reporting one of the world’s largest natural gas discoveries in a decade off the coast of Mozambique. It controls an 8.5 percent interest the Rovuma Area 1 natural-gas block that may hold 30 trillion cubic feet of the fuel. The gas will supply a liquefied natural gas plant that can ship fuel across the Indian Ocean to Asian markets.

“Shell represents an excellent partner for all the stakeholders,” Cove Executive Chairman Michael Blaha said in the statement. The oil company has “extensive project development, operating and marketing experience in the entire liquefied natural gas value chain.”

Cove climbed 4.6 percent, or 10 pence, to 227 pence in London. The stock has almost doubled this year.

Competing Offers

“Competing offers can still be made and the shares will now likely trade to a slight premium on the hope that PTTEP will trump Shell,” Investec analyst Stuart Joyner said in a note to investors.

Today’s bid represents a 42 percent premium to Cove’s share price before Shell made its first offer. The seller is being advised by Standard Chartered. (STAN)

“PTTEP is currently considering its options and will make a further announcement as and when appropriate,” the company said separately, adding that there is no certainty it will make another offer.

Thailand’s biggest publicly traded explorer was keen to buy Cove as part of its plan to triple the company’s output to 900,000 barrels of oil equivalent a day by 2020. Beyond Mozambique, PTTEP is seeking larger reserves in Tanzania and Kenya.

Mozambique is reviewing petroleum and mining laws as it looks to benefit from higher commodity prices. The country announced plans to set up a team from its finance and mineral resources ministries on April 3 to propose how to calculate taxes on gains on the sales of shares or companies. Cove said a week later that it will face a 12.8 percent tax on capital gains from a potential sale.

Fresh Source

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 (STL) of Norway also discovered gas off Mozambique and Tanzania.

Shell, which joined forces with Petroleo Brasileiro SA (PETR4) of Brazil last year to search for oil and gas off Tanzania, has been unsuccessful so far in East Africa. It plans to increase spending on exploration 35 percent to about $5 billion this year. The company is the world’s largest manager of LNG ships and its joint ventures supplied 30 percent of global LNG volumes last year.

Before taking up his position at Cove in 2009, Blaha worked for Shell for 29 years, finishing up as the country chairman for Algeria. He also held positions in Russia, Iran and Shell’s head office in The Hague.

Cove has also 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.

To contact the reporter on this story: Kari Lundgren in London at klundgren2@bloomberg.net

To contact the editor responsible for this story: Will Kennedy at wkennedy3@bloomberg.net


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