London, England — 17 July 2012 – Thailand’s PTT E&P is in the box seat to complete a US$1.9 billion takeover of Cove Energy plc and gain access to massive gas finds off the coast of east Africa, after Royal Dutch/Shell bowed out of a five-month bidding war
Reuters reports that acquiring Cove will give PTT Exploration and Production exposure to the giant offshore discoveries made in East Africa in the past year. The area looks set to emerge as a major supply province and is well-situated to export into Asia.
Shell’s exit from the bid fueled talk that the energy giant has found a new way to tap the market, possibly by buying a stake from another partner in the consortium, which may welcome the experience of an international oil major.
Cove owns an 8.5% stake in a Mozambique licence in the Rovuma offshore basin containing gas discoveries that could be a major provider of liquefied natural gas (LNG) to energy-starved Asia.
Some analysts believe that with oil prices around historically high levels, the offers for the Cove deal were priced at a significant premium.
“In the current oil price environment, we see PTT E&P’s aim to acquire the assets at an attractive valuation as a challenge,” said Scott Darling, head of Asia Oil & Gas Research at Barclays.
Analysts said PTT E&P would need to invest US$1 to1.5 billion into the project annually over the next few years.
Cove shares, which closed at 275.5 pence last week, fell 13.6% after the news yesterday to finish just shy of PTT’s offer at 238.5 pence.
Shell’s decision is a blow to the hordes of hedge funds that bet on Shell outbidding PTT.
State-controlled PTT E&P, Asia’s third-largest independent oil and gas explorer, has access to cash and brings strong domestic demand for future LNG contracts. Thailand’s demand for gas is rising as its economy develops. The country opened its first LNG import terminal in 2011 and plans to double capacity there to 10Mtpa by 2016.
Source: Reuters Africa. For more information, click here.