Shell offers Cove Energy €1.17bn for its business

IRISH OIL and gas exploration company Cove Energy has received a £992.4 million (€1.17 billion) offer from Royal Dutch Shell for its business.

The Dublin-based, London-listed company has in recent years made significant gas discoveries in east Africa. Shell is offering 195 pence for each Cove share, a 26 per cent premium to the closing price of the company yesterday, according to a statement.

Founded in 2003, Cove’s main asset is an 8.5 per cent stake in the Rovuma Offshore Area 1, in Mozambique, which holds between 15 trillion to 30 trillion cubic feet of recoverable gas. The find is operated by Anadarko Petroleum.

The discovery followed a 2009 deal in which the explorer, formerly known as Lapp Plats, acquired an interest in three licences in Tanzania and Mozambique that were thought to have significant potential.

Cove, jointly with Maurel Prom, bought the licences from Artumas Group for $10,980,031 (€8.3 million) of which $3,294,009 was paid by Cove.

In order to provide sufficient working capital following these transactions, Cove Energy raised £42 million before expenses through the issue of up to 210,000,000 new ordinary shares at a price of 20 pence per share with institutional and other investors. In May 2009, the company had made a raft of board appointments with Shell executive Michael Blaha becoming non-executive chairman, and former Petroceltic boss John Craven hired as chief executive.

The company’s finance director is Irishman Michael Nolan, the former chief executive of AIM listed mining company Minmet.

Mr Craven, a petroleum geologist, was the founder and former chief executive of AIM and ESM quoted exploration company, Petroceltic.

Cove put itself up for sale on January 5th after reporting the Mozambique find which was one of the world’s largest gas discoveries in a decade off the country.

Italy’s Eni has also made major gas finds as has Norway’s Statoil. It is believed Cove’s discovery is enough to justify production of liquefied natural gas for Asian markets, an area in which Shell wants to increase its footprint.

In 2011, Shell joint ventures supplied more than 30 per cent of global liquefied natural gas volumes. A presence in what is expected to emerge as one of the world’s major liquefied natural gas provinces is therefore seen as a logical step for the company.

Noting that bringing the gas resources on stream is a strategic priority for the Mozambican government bid to develop the country economically, Shell has cited its industry record on liquefied natural gas plant construction times and on safely delivering finds to production.

Shell produces liquefied natural gas in Australia, Brunei, Malaysia, Nigeria, Oman, Russia and Qatar.

The offer of 195 pence for each Cove share is a premium of 73 per cent to the closing price of 112.5 pence per Cove share on January 4th, the last day prior to Cove’s announcement of its sale.

Cove’s board is expected to recommend the proposed acquisition to the company’s shareholders.

COVE WINDFALL:

BOSSES SET FOR €45m PAYDAY

THE BOSSES of London-listed oil and gas explorer Cove Energy are in line for a £38 million (€45 million) payday after Royal Dutch Shell put in a near-£1 billion takeover bid.

John Craven, Cove’s chief executive and veteran geologist, is in line for an £18 million payout less than three years after he created the African-focus explorer.

Michael Blaha, Cove’s chairman and Shell’s former head of Alergia, holds shares and options worth £13.5 million under the 195p-a-share cash offer.

The company’s finance director, Irishman Michael Nolan, is in line for £7.1 million.

Hundreds of Irish investors are set to share in a multi-million euro payout if the sale of Cove Energy to Shell goes ahead.

Around 10 per cent of shares in the company are held by Irish shareholders, some of whom may have first bought shares in Cove for as little as 8 pence.

Shells £992.4 million (€1.17 billion) bid now values the stock at 195 pence, a 24-fold increase on that price.

Educated at Queens University Belfast, Craven is a petroleum geologist who has spent over 35 years in the oil and gas exploration game. – (Additional reporting: Guardian service)