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Shell Bids on Cove Energy

Written By Brianna Panzica

Posted February 22, 2012

On Wednesday, Royal Dutch Shell (NYSE: RDS.A) placed a bid worth $1.6 billion on Cove Energy (LON: COV), an oil and gas company that has its main asset in a play in Mozambique.

Cove decided to sell on January 4, just after it announced a huge find in southeast Africa.

And Shell is offering 195 British pence per share in cash, or $3.07, a 70% premium over the January 4th share price.

Cove owns an 8.5% stake in Rovuma Offshore Area 1 in Mozambique.  Anadarko (NYSE: APC) announced a find here of a possible 30 trillion cubic feel of natural gas, which Shell is interested in.

Analysts believe that if Shell secures Cove, it will move on to offer bids on other companies’ stakes in Rovuma.  Irene Himona of Societe Generale told Reuters:

“As the number one LNG player, Shell absolutely must be in East Africa…we should assume that 8.5% is too small for them.”

But the company has not yet secured Cove.

Westhouse analysts suggested that some competitors could include Korea National Oil Corp, GAIL of India (NSE: GAIL), and CNOOC (NYSE: CEO) or other Chinese oil companies.

And Cove jumped 25.13% on Wednesday to 193.32 British pence, close to Shell’s offer.

Shell has had trouble getting involved in East Africa, but it plans to spend about $5 billion on exploration, an increase of 35%.

Cove could be that ticket into East Africa that Shell needs to gain even more assets in the region.

Shell was down 0.4% to $72.61 in Wednesday morning trading.

That’s all for now,


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