Business World

Monday 22 January 2018

Thais top Shell's $1.6bn offer for Cove as shares surge ahead

Traders speculate that Shell will return with an increased bid for tempting prize of Irish-managed explorer's gas assets

PTT Exploration &
Production, Thailand’s
only listed oil and gas
company, offered £1.1bn
(220p a share)for Cove
Energy trumping Shell's
£950m (13pc more).
PTT Exploration & Production, Thailand’s only listed oil and gas company, offered £1.1bn (220p a share)for Cove Energy trumping Shell's £950m (13pc more).
Peter Flanagan

Peter Flanagan

Irish-managed exploration firm Cove Energy was at the centre of a potential bidding war last night after Thailand's state-backed oil company made a $1.7bn (€1.26bn) offer for the company.

PTT Exploration and Production's offer topped a $1.6bn bid made earlier in the week by Royal Dutch Shell that was welcomed by Cove's board, but yesterday Cove's directors said the bidding process would continue.

Traders immediately began to speculate on the potential for Shell to make a comeback offer or for a third bidder to enter the fray. Cove surged 20.67pc in London to 235p, far above PTTEP's offer, which is worth 220p a share.


Dolmen Securities analyst Brian Gallagher, who has a "buy" recommendation on Cove, said the scale of the bids suggested the market believed there was more upside to Cove's assets than previously thought.

The company's main focus is an 8.5pc stake in a in an off-shore field in Mozambique, where operator Anadarko has found more than 30 trillion cubic feet (TCF) natural gas.

"The size of the second bid underlines the quality of the assets on offer and would suggest that participating bidders are seeing much greater reserve potential than previously thought.

"The successful bidder will gain access to potentially one of the world's largest gas fields while earning pre-emption rates against any further sales on the block," he added.

As well as Anadarko, Japan's Mitsui and Indian groups Bharat Petroleum and Videocon also own stakes in the licence.

In a statement yesterday Cove said the formal sale process would continue. There is no official deadline for bids under UK Takeover Panel rules.

Markets are now focused on whether Shell will make a new bid or if another firm, such as India's ONGC, will table an offer. Cove's closing price yesterday suggests the market believes another offer will come. Any successful bid will have to be approved by the Mozambique government.

"We think Shell is the Mozambique government's preferred bidder and will likely raise its offer to 240 pence a share," said Stuart Joyner, an analyst at Investec Securities.

Statoil's Executive Vice President for Exploration Tim Dodson declined to say whether Norway's largest oil company would join the race for Cove, Bloomberg News reported.

The bidding process will now benefit Irish oil veterans John Craven and Michael Nolan even more than previously thought. Mr Craven, who previously founded Petroceltic, is chief executive of Cove while Mr Nolan is finance director.

Both men are now set to earn tens of millions of euro between them. Cove's senior management own around 5pc of the company in shares and stock options, which today's bid could value at as much as €63m.

The sale may also bring a windfall for a number of Cove's Irish shareholders. Around 10pc of the shareholders are thought to be from here.

They were attracted by Dolmen Stockbrokers, which raised money for Cove Energy shortly after Mr Craven took over.

newsmaker, Page 37

Irish Independent

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