By ALEX MACDONALD
Anglo-Dutch oil major Royal Dutch Shell on Wednesday made a proposed GBP992.4 million cash offer to buy all the shares of UK-listed Cove Energy, marking the company's first foray into Kenya and Mozambique, the latter of which already shows significant potential for liquefied natural gas projects.
Shell is offering 195 pence/share for all the issued and to be issued share capital of Cove Energy through its Shell exploration and production unit.
The offer represents a 73.3% premium to the closing price of 112.5 pence per Cove share on Jan. 4, the day prior to Cove's kick-off of a sale process.
The deal is contingent on regulatory approval, including consent from Mozambique's minister of mineral resources relating to Cove's 8.5% interest in the Mozambican Rovuma Offshore Area 1 Block.
Cove's board of directors believes that the proposed offer is sufficiently attractive that it would seek to help Shell reach a point where it feels comfortable enough to make a formal offer.
Shell is already in East Africa through its interests in Tanzania.
"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," the proposed offer document said.
In Mozambique, the Rovuma offshore basin holds large resources of natural gas reserves, suitable for LNG projects.
According to Cove, the Rovuma area represents the potential for more than 30 trillion cubic feet of natural gas and six LNG liquefaction and purification units, known as trains.
Shell is one of the world's largest LNG producers with equity sales volumes of 18.83 million tpy of LNG in 2011.
Adding Cove's assets to Shell's portfolio would strengthen and further diversify Shell's existing global LNG portfolio of production and development projects.
Early Wednesday, Cove Energy's shares traded up 24.3% or 38 pence at 192 pence. Shell's B shares traded up 0.2% or 1 pence at 296.3 pence a share.
Dow Jones Newswires