Cove Energy, a UK oil and gas company with primary assets in East Africa, yesterday urged its shareholders to accept the $1.8 billion takeover bid from Shell before May 23, the first closing date for the offer from Shell.
The board of Cove, having already endorsed the offer, has said it continues to believe that it is in the best interests of Cove shareholders to accept the offer.
Despite also receiving a similar offer from Thailand’s PTTEP, and the rumors that a consortium from India is preparing a $2 billion offer, the board of Cove has said that, to date, Shell Bidco is the only firm bidder and has strongly recommended its shareholders to accept the offer as soon as possible.
To support the recommendation, the board has highlighted the fact that Shell has already secured the consent of the Government of Mozambique to the indirect acquisition of Cove’s interest in Rovuma Offshore Area 1 which would arise on the takeover of the company.
An 8.5% interest in Mozambique Rovuma Offshore Area 1 is Cove Energy’s primary asset. Anadarko, the operator of the area, last week announced it had made another major discovery in the field. The discovery well, named Golfinho, encountered more than 193 net feet (59 net meters) of natural gas pay. The well was drilled using the Belford Dolphin drillship.
- Anadarko: Another Major Discovery Offshore Mozambique (mb50.wordpress.com)
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Shell’s subsidiary, Shell Bidco has placed a bid £992.4 million (USD 1.56 billion) to acquire the entire issued and to be issued share capital of UK headquartered Cove Energy.
The bid comes one month after the decision announced by Cove to conduct a formal sale process for the company. Shell Bidco is a participant in the formal sale process and, as a result of such participation, Shell Bidco and Cove are near agreement on the full terms and conditions of a recommended cash offer by Shell Bidco for Cove. According to the report on Cove Energy’s website, Shell will pay 195 pence for each Cove share.
Still, the making of the Firm Intention Announcement is subject to, and conditional upon, the receipt of written consent of the Republic of Mozambique’s Minister of Mineral Resources which is related to Cove’s 8.5 per cent participating interest in the Mozambique Rovuma Offshore Area 1 Block (the “Rovuma Area 1 Interest”),
Cove to assist with approvals
East Africa focused Cove has agreed, for as long as the Board of Cove expects to recommend the Proposed Offer, to assist Shell Bidco in relation to obtaining any required governmental consents, including the Mozambique Consent, as soon as reasonably practicable after the release of this announcement.
Shell’s decision to announce this Proposed Offer for Cove fits with Shell’s strategic aim to drive forward with its investment programme, to deliver sustainable growth and to provide competitive returns to shareholders.
East Africa is a major prospective hydrocarbon province, which has seen a significant increase in exploration activity in recent years. 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. In Mozambique, the Rovuma offshore basin is a frontier exploration area that holds large resources of natural gas reserves, suitable for LNG projects. According to Cove, the play represents the potential for 30+ tcf and 6 LNG trains.
“Shell understands that bringing these resources on stream is a strategic priority for the Mozambican Government in order to foster further economic and community development in the country, and Shell is committed to being a partner in that process,” said Shell in a statement.
Shell is one of the world’s largest LNG producers, with one of the most diverse LNG portfolios and access to strategic global markets with equity sales volumes of 18.83 mtpa of LNG in 2011. Shell holds the largest equity share of LNG capacity among IOCs – currently holding some 20.5 mtpa of equity LNG capacity on-stream. Adding Cove’s assets to Shell’s portfolio would strengthen and further diversify Shell’s existing global LNG portfolio of production and development projects. Furthermore, Shell has set industry records for LNG plant construction times and operational start-ups, safely delivering projects from concept to first production for/with its partners. In joint ventures with partners, Shell currently produces LNG in Australia, Brunei, Malaysia, Nigeria, Oman, Russia and Qatar, with excellent production reliability performance achieved at all these plants.
In addition to Shell’s technical expertise, its marketing and shipping know-how is designed to enable the delivery of long-term added value together with project partners. Shell has access to the key LNG markets of Europe, Asia Pacific and North America. In 2011, Shell joint ventures supplied more than 30 per cent. of global LNG volumes. Shell would also bring its extensive project finance experience across the LNG value chain. Shell’s experience in LNG project finance extends over many projects, e.g.: Oman LNG, Nigeria LNG, Qatargas 4, Sakhalin.
Shell management said it was confident that its innovative technologies, leading plant designs, unmatched LNG operational experience and proven commercialisation strategies, combined with the experience of the operator of the Mozambique Rovuma Offshore Area 1 Block and the joint venture partners can add significant value to the project.
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