Just when Shell Bidco was planning to cash-in on Cove Energy’s East African assets offshore Mozambique, Thailand’s PTT Exploration and Production Co. Ltd. (PTTEP) outbid the company by 9.1%, upping its offer to $1.9 billion.
Since Jan. 5, when Cove Energy informed the public that it was putting itself on the market, two companies -- Shell and PTTEP -- have been in a bidding war for Cove over its 8.5% stake in Mozambique’s Rovuma Offshore Area 1 block that is currently estimated to contain 25-50 trillion cu ft of gas (Tcf), and Cove’s 10% interest in the Rovuma Onshore block.
On May 15, Offshore Area 1 block’s reserves skyrocketed by 20 Tcf of gas due to a natural gas find in the deepwater Golfinho exploration well. The well contained 59 net m (193 net ft) of gas pay in two high-quality Oligocene fan systems that were the same age but geologically different from the previous discoveries in the Prosperidade complex.
“The success of the Golfhino well significantly expands the tremendous resource potential of the Offshore Area 1 in the deepwater Rovuma Basin, with additional opportunities yet to test,” stated Bob Daniels, senior vice president of worldwide exploration, Anadarko Petroleum, which is the operator of Golfhino. “The Golfhino discovery, which is entirely contained within the Offshore Area 1 Block, adds an estimated 7.0 to 20-plus Tcf of incremental recoverable resources over a significant areal extent.”
The Golfhino find unlocked even more potential riches from the Mozambique block. With undiscovered resources in the concession rising, PTTEP was willing to pitch a higher takeover offer and continue the brawl for Cove’s prize resources.
On Feb. 22, Shell fired the first takeover offer of $3.00 per Cove share, or $1.5 billion.
On Feb. 24, PTTEP launched a counterbid and jumped its offer to $3.38 per Cove share, or $1.7 billion.
Then, on April 24, Shell chucked a counterbid price of $3.44 per Cove share, or $1.8 billion. A press release from Cove’s board followed, which stated that the government of Mozambique had approved the potential Shell transaction and urged shareholders to close the deal with the seasoned company. Cove's shareholders were given until May 23 to accept Shell's offer.
PTTEP waited until the final day of Shell's potential takeover offer, May 23, and presented a 9.1% higher counterbid for Cove. PTTEP upped its offer to $3.76 per Cove share, or $1.9 billion. A press release from Cove’s board was released on the offer’s heels, which said that the board withdrew its earlier recommendation for the acceptance of Shell's price and recommended that shareholders take PTTEP’s bid.
Cove seems to be enjoying the bidding action since the value to the company continues to skyrocket with the new reserves leading to the $1.9 billion price tag. John Craven, Cove’s chief executive officer, commented, “The bid from PTTEP represents significant value for shareholders and confirms the world-class nature of Cove’s East African assets.”
The Mozambique government was also quick to give the thumbs up, a Cove press release published six days after PTTEP’s offer relayed that the government had confirmed the takeover of Cove by PTTEP. This stamp of approval was a sharp turn from the Mozambique minerals ministry official who had previously suggested to Reuters that Shell was the best option for Cove given the company’s extensive liquefied natural gas (LNG) background.
Although Shell claimed to be the better suitor for Cove’s Mozambique foothold due to its LNG experience, PTTEP’s chief executive officer, Pailin Chuchottaworn, told CNBC that PTTEP’s first regasification facility had been completed in Thailand and that completion of its second phase would enable the country to process about 10 million metric tons of LNG per year.
Chuchottaworn informed CNBC that PTTEP is in the process of building a stronger LNG infrastructure in Thailand due to an estimated increase in demand within the Asian market. He assured that his company would bring “a very stable LNG market” to Cove’s shareholder’s tables.
Whether Cove’s takeover winner is Shell or PTTEP, the company that enters into the Anadarko-operated Rovuma Offshore Area 1 block will need to be prepared for the cost of major LNG operations. Anadarko is preparing to build multiple trains in order to liquefy the gas produced from the block for export purposes, the company told Reuters.
Tevin Vongvanich, chief executive officer of PTTEP, concluded, “This potential acquisition illustrates our commitment to leveraging the LNG value chain of the PTT Group and is consistent with our long-term strategic priorities.”
Contact the author, Kate Permenter, at kpermenter@hartenergy.com.
