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Europe’s largest oil company, Royal Dutch Shell, declared its firm intention to acquire the British oil explorer Cove Energy for a tag price close to a £1 billion, official statements from both companies reported on Wednesday, 22nd February.
Royal Dutch Shell, through its wholly-owned subsidiary, Shell Exploration and Production (“Shell Bidco”), is offering 195 pence for every Cove Energy share valuing the acquisition at £992.4 million, or 40 pence more than Cove Energy’s trading price yesterday.
Only Bidder to Date
Shell is the only company that confirmed its intention to acquire Cove Energy, an independent oil explorer with onshore and offshore assets in Mozambique, Tanzania, and Kenya, since Cove Energy opened itself up for a take-over early this year.
In late January of this year, rumours spread of a possible offer from BP, as well as other national oil companies, including India’s Oil & Natural Gas Corporation, China’s National Offshore Oil Exploration, Korea’s Gas Corporation, and Thailand’s PTT Exploration & Production.
None of the reported companies issued a formal statement as to their intention of acquiring Cove Energy.
Rewriting Resources Ownership in Africa
Shell’s acquisition of Cove Energy will in turn provide the oil giant stake in Wentworth Resources.
In January 30th, Cove Energy and Wentworth Resources agreed on the sale of Cove Energy’s Mnazi Bay Concession in Tanzania, valued at US$38.8 million, which included two million shares in Wentworth.
The Mnazi Bay Concession produces between 1.7 to 2 million cubic feet of gas per day, being used to supply the Mtwara Power Plant that generates electricity to local communities in Tanzania.
Shell’s Point of Entry to East Africa
Shell undertook oil explorations with Petroleo Brasileiro in Tanzania last year, which failed as no oil was discovered.
An acquisition of Cove Energy will enable Shell to tap to the successful discoveries of oil and gas in the East Africa region, which is now being dominated by Total, Wentworth Resources, BG Group & other oil producers.
“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 offshore Mozambique, and further complementary exploration positions in East Africa,” the statement said.
Shell continually seeks to secure its position as one of the largest LNG producers with 18.83 million tonnes per annum of LNG accumulated in 2011.
Oil and Gas Potentials
Cove Energy reported yesterday, an additional 577 feet of net natural gas pay from the 8th well drilled in the Rovuma Basin Area 1 Block in offshore Mozambique, where it has 8.5% interest, adding confirmation to the concession’s resource of 15 to 30 trillion cubic feet of natural gas.
Market Reaction
More than 76 million shares of Cove Energy switched ownership at 11:00 GMT, following the announcement.
On the other hand, Royal Dutch Shell’s A and B shares are trading slightly lower than their prices yesterday, down -0.22% and -0.39% to 2,298.50 pence and 2,324.50 pence, respectively, at 1100 AM GMT.
Company Spotlight
Cove Energy is an AIM-listed oil and gas exploration company engaged in early phase onshore and offshore oil and gas discoveries with a goal marketing them to major oil companies.
Royal Dutch Shell is a global energy and petrochemical company incorporated in England and based in Netherlands, exploring oil and gas and producing refined products such a fuel, lubricants, and bitumen.
References
↑ Mnazi Bay Concession
↑ Cove Energy Operations Overview – Operators and Stakeholders
