LONDON: Royal Dutch Shell has agreed to buy Mozambique-focused explorer Cove Energy for £1.12 billion in cash, raising its earlier offer to secure access to a new gas frontier in East Africa.
The oil major said on Tuesday it had increased its initial $1.6 billion approach to match a rival bid made by Thai state-controlled oil and gas group PTT in February.
Industry interest in East Africa has been gathering pace after huge gas discoveries were made there, with the region tipped to become a major natural gas producing region supplying liquid natural gas (LNG) to energy hungry Asian markets.
Cove’s directors, recommending the offer to shareholders and in possession of a collective 4.38 per cent stake in the company, said they would be accepting the 220-pence-a-share offer. “Shell represents an excellent partner for all the stakeholders in the Rovuma LNG project given its extensive project development, operating and marketing experience in the entire LNG value chain,” Cove’s executive chairman Michael Blaha said in a statement.
The emergence of a bid from Thailand’s PTT in February, beating Shell’s initial offer, prompted hopes of a bidding war.
PTT could not immediately be reached for comment on Tuesday.
Cove’s shares were up three per cent at 223.5 pence in early trade, signalling investors are hopeful of a higher bid.
The deal with Shell includes a break fee of 11.1 million pounds which Cove will owe Shell should a competing offer win the company.
Shell said its offer represented a 95.6 per cent premium to the closing price of Cove’s shares on January 4, the day before the company put itself up for sale, and that the deal was conditional upon approval from the government of Mozambique amongst other things.
Cove’s main asset is an 8.5 percent stake in the Rovuma Offshore Area 1 in Mozambique, where operator Anadarko has said recoverable reserves could top 30 trillion cubic feet of natural gas.