More reports on: M&A, Gas Authority of India Limited, ONGC Videsh, Oil & gas
Shell's $1.57 bn offer outbids OVL, GAIL for UK's Cove Energy news
22 February 2012

Royal Dutch Shell is buying UK-listed African explorer Cove Energy for 992.4 million ($1.57 billion), after Europe's largest oil and gas company outbid Indian and other oil majors.

ONGC Videsh Ltd (OVL), the overseas arm of state-owned ONGC, and GAIL consortium found its offer of around Rs6,000 crore ($1.2 billion) trumped by Shell's higher bid.

Last month, Bloomberg had reported that Oil India was also to have bid for Cove Energy, but is said to have backed out due to unspecified technical reasons.

London-based Cove Energy, which was formerly known as Lapp Plats plc till July 2009, had hired Standard Chartered Bank and Cenkos Securities Plc to identify a potential buyer for itself, and last month opened a data room for interested bidders.

The Anglo-Dutch oil major is offering 195 pence for each Cove share, a 26-per cent premium, and the board of the Africa-focussed explorer said that it would recommend the proposed acquisition to its shareholders.

Cove Energy, which has a market capitalisation of around $960 million, has interests in oil and gas blocks in onshore and offshore Mozambique, offshore Kenya, and onshore and offshore Tanzania.

BlackRock, the world's largest asset manager, holds a 7.6-per cent stake in Cove Energy.

Cove holds an 8.5-per cent stake in the Rovuma Area 1 offshore Mozambique, in which US-based Anadarko Petroleum is the operator with 36.5-per cent stake. Other stakeholders include Bharat Petroleum and Videocon Industries with 10 per cent each and Japan's Mitsui holds 20 per cent.

The remaining 15 per cent participating interest is being held with Empressa Nacional de Hidrocarbonetos EP (ENH EP), the National Oil Company of Mozambique, at the exploration phase, which can be altered during the production phase.

After four significant gas discoveries at Rovuma in 2010 and early 2011, the partners have put current estimates for the resource potential at some 12 trillion cubic ft of gas.

According to Cove, the Rovuma area has the potential for more than 30 trillion cubic feet of natural gas and 6 LNG liquefaction and purification units, known as trains.

Cove Energy also holds a 10-per cent stake in Mozambique Rovuma Onshore, a 16.4-per cent interest in the production and 20.5 per cent interest in the exploration in the Tanzania Mnazi Bay gas fields.

Cove Energy also owns a 9-per cent stake in five Kenya offshore blocks, and 25-per cent and 15 per cent in two other blocks respectively. All these blocks are currently at an exploration stage.

Shell said that it is making the offer but required additional time to ascertain the timetable and process for obtaining the Mozambique Consent and the terms of such consent. Cove would require the approval of ENH EP for divesting its stake in Rovuma.

Shell is one of the world's largest LNG producers with LNG sales of 18.83 million tons in 2011. It is the industry leader in freezing natural gas into LNG for export in tankers around the world. Shell and its joint ventures supplied more than 30 per cent of global LNG volumes.

Adding Cove's assets to its portfolio would strengthen Shell's portfolio and further diversify its existing global LNG portfolio of production and development projects.

Shell had last year said that it would increase spending on exploration by 35 per cent to about $5 billion this year.

"Shell already has interests in Tanzania, and the acquisition of 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," Shell said in a statement.

OVL, which in October 2011 inked a deal to acquire a 25-per cent stake in Kazakhstan's Satpayev offshore exploration block located in the North Caspian Sea, has stakes in 33 projects in 14 countries including Vietnam, Myanmar, Russia, Syria, Egypt, Libya, Nigeria, Sudan, Brazil, Colombia, Venezuela and Cuba.

Its biggest acquisition to date is its 2009 purchase of Imperial Energy for $2.1 billion (See: ONGC completes acquisition of Imperial Energy)

GAIL is India's largest natural gas and liquefied petroleum gas company and also the country's biggest gas pipeline operator.

It recently entered the lucrative shale gas business in the US by acquiring a 20-per cent interest in the Carrizo Oil & Gas Eagle Ford Shale acreage.

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Shell's $1.57 bn offer outbids OVL, GAIL for UK's Cove Energy