Cove draws big offer from Shell

African oil explorer likely to approve bid at 26% premium

Eduard Gismatullin ROYAL Dutch Shell, Europe’s largest oil company, has offered to buy African explorer Cove Energy for £994.4 million (R12.1 billion) to expand in Mozambique and Kenya.

Shell said it was offering £1.95 for each Cove share, a 26 percent premium to the closing price of the Londonbased company on Tuesday.

Cove’s board said separately that it expected to recommend the proposed acquisition.

Cove put itself up for sale after reporting one of the world’s largest gas discoveries in a decade off Mozambique. The bid is at a 70 percent premium to Cove’s price on January 4, when it sought interest.

Cove holds an 8.5 percent stake in the Rovuma Area 1, which holds 15 trillion to 30 trillion cubic feet of recoverable gas, enough to justify production of liquefied natural gas for Asian markets. The discovery is operated by Anadarko Petroleum.

“This is a much better price than the market anticipated and will likely not see” another bidder, said Stuart Joyner, an analyst at Investec Securities in London.

Cove rose as much as 25 percent to £1.9325 a share in London trading yesterday. The shares were at £1.9225 at 11.30am London time.

Shell declined 0.5 percent to £22.91 in London.

Cove has already been working with Total and BG Group to explore off the coast of Kenya. Last year, it joined Cairn Energy to bid for exploration licences off Lebanon.

Shell, which joined forces with Petroleo Brasileiro of Brazil last year to search for oil and gas off Tanzania, has been unsuccessful so far in east Africa. The Anglo-dutch company plans to increase spending on exploration by 35 percent to about $5bn (R38bn) this year.

Cove had received “a lot of serious interest” from national and international oil firms, said John Martin, a managing director at Standard Chartered Bank, which is advising Cove on the sale. – Bloomberg