Shell Bids for Cove Energy at USD $1.8 Billion

PUBLISHED: Apr 24 2012 @ 12:04 | Comments (0) | More info about Kenneth G. Mondero

Oil giant firm Royal Dutch Shell (LSE:RDSA)(LSE:RDSB) raises its offer to acquire Cove Energy (LSE:COV) at US$1.8 billion, in what may become a bidding war to take over the newly discovered oil and gas deposits east of Africa.

The revised terms presented by Shell on Tuesday, 24th April, rivals Thailand’s PTT Exploration & Production’s offer two days after Shell declared its intention back in February.

The Directors of Cove Energy “intend to recommend unanimously” Shell’s offer.

The Stake

Cove Energy has an 8.5% interest in the Rovuma Basin Area 1 Block being operated by Anadarko, which has recently discovered a resource estimate of about 30 trillion cubic feet of natural gas offshore of Mozambique.

The company placed itself up for grabs in January, in line with the company’s investment objectives of acquiring assets in their early phase of development and mature them into marketable opportunities.

Counter Offer from PTTEP?

“PTTEP is currently considering its options and will make a further announcement as and when appropriate,” PTTEP’s official statement read in response to Shell’s announcement today.

But some analysts say that Shell will most likely win the war as the Government of Mozambique will favour the more established company to develop its resources.

“A key component of this is how the Mozambique authorities want to develop their resources and a project of this scale needs an oil major with the financial resources and the expertise of bringing world class scale projects to fruition so you need someone like a Shell,” said analyst Andrew Matharu of Westhouse Securities.

Cove Energy’s Chairman, Michael Blaha echoed this sentiment saying “Shell represents an excellent partner” in the development of the LNG project in Mozambique.

Company Spotlight

Since then, Cove Energy’s market value has increased tremendously, more than doubled since December 2011, following anticipation of a final sale agreement.

In London’s Alternative Investment Market, Cove Energy inched 4.26% more to 226 pence at 2:00 PM GMT, following the news.

References
↑ Company History
↑ PTTEP Proposed Cash Offer for Cove Energy
↑ Cove Energy Assets in Mozambique
↑ PTTEP Statement on Shell’s Cash Offer for Cove Energy

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