ROYAL DUTCH Shell has increased its offer for the oil and gas exploration company Cove Energy to £1.12 billion (€1.37bn).
In its effort to access East Africas huge gas reserves, Europes largest oil company has matched a counter-bid for Cove made by Thai state-controlled oil firm PTT Exploration and Production (PTTEP) in February.
PTTEP said it is now “considering its options” following Shell’s move.
The cash offer from Shell, which has been recommended by directors of Cove, is of the order of 220 pence per share, thus valuing Cove at £1.12 billion.
Cove put itself up for sale on January 5th after reporting one of the worlds largest gas discoveries in a decade in Mozambique.
In an announcement, Shell said its decision to increase its offer for Cove “fits with Shells strategic aim to drive forward with its investment programme to deliver sustainable and profitable growth.
It would facilitate Shells entry into exciting new hydrocarbon provinces, in Mozambique and Kenya, which would strengthen and further diversify Shells existing global LNG (liquified natural gas) portfolio of production and development projects.
Coves directors, who include chief executive, John Craven, a former founder of Petroceltic, and finance director Michael Nolan, consider the offer to be fair and reasonable.
Accordingly, they have voted to recommend unanimously the deal.
The proposed transaction is in line with the companys long term strategy, as set out in May 2009, of delivering value to shareholders through exploration and appraisal, Michael Blaha, executive chairman of Cove, said yesterday.
Shells new offer price represents a premium of 134 per cent on the last trading day before Cove announced the proposed sale. Cove yesterday closed above Shell’s offer, at 226.75p, thus indicating that investors expect a higher counter-offer from PTTEP, or another interested party, may yet be made.
In a statement yesterday, Anon Sirisaengtaksin, president and chief executive officer of PTTEP, did not rule out such a move, declaring that the firm is currently considering its options and will make a further announcement as and when appropriate.
The latest offer, which represents a 13 per cent premium on Shell’s initial offer, is subject to a break-fee of £11.1 million, if the offer lapses or is withdrawn, of if a competing offer is declared unconditional.
About 10 per cent of Cove’s shareholders are Irish, which means that they could share £112 million should the deal go ahead.
Founded in 2003, Coves 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. Cove is listed on London Stock Exchange and has its registered office in London.
