Shell-PetroChina Takeover of Arrow Means $308 Million Profit for New Hope

The takeover of gas producer Arrow Energy Ltd. by Royal Dutch Shell Plc and PetroChina Co. will generate a A$326 million ($308 million) profit for shareholder New Hope Corp., giving the coal miner more cash for acquisitions.

“New Hope recognized the likelihood of coal-seam gas having a greater role in the energy equation in eastern Australia and that turned out to be correct,” Robert Neale, managing director of the Ipswich, Queensland-based company, said in an interview. “The earlier in, the better the profit.”

New Hope increased investment in Australian gas explorers this year, acquiring 20 percent stakes in WestSide Corp. and Planet Gas Ltd. The company, which also holds a 17 percent share in Arrow spinoff Dart Energy Ltd., has almost A$2 billion in cash that it may spend on buying energy and coal assets, exploration and expansion, Neale said, declining to identify acquisition targets.

“Gas is part of our broader diversification into the energy sphere, rather than strictly coal-mining activity,” he said by phone today. “As the power-generation needs of this country grow, then in the near term it’s evident that gas will be the most likely generator of baseload power generation.”

New Hope said today net income fell 30 percent to A$183.8 million in the year ended July 31, partly because of lower export coal prices and higher transportation costs.

The board of New Hope declared a special dividend of 14 Australian cents a share and a final dividend of 4.5 cents. “It’s easier enough to buy stuff if you’ve got the money, but you have to make sure you deliver dividends,” Neale said.

Gas, Coal Acquisitions

The company held 122.6 million shares of Arrow at the end of July, or almost 17 percent of the Brisbane-based coal-seam gas producer. The shares had cost New Hope about A$110 million, the company said. Arrow was acquired by Shell and PetroChina this year at A$4.70 a share, valuing New Hope’s interest at about A$576 million.

New Hope will record the after-tax profit of A$326 million from Arrow in the year ending in July 2011, the company said. Shares of Dart Energy have increased 36 percent to A$1.06 in Sydney since beginning trading at 75 cents a share on July 22.

New Hope has no immediate plans to bid again for Macarthur Coal Ltd., Neale said. Macarthur Coal, the world’s largest producer of pulverized coal, rejected takeover offers earlier this year from Peabody Energy Corp. and New Hope.

“They’ve taken their decision, and we’ve withdrawn,” he said, declining to comment further.

Foreign companies are targeting coal producers in Australia, the world’s largest exporter of the fuel, to benefit from increasing sales to Asia.

While New Hope is considering acquisitions, “one of our challenges is that we have to get an economic return,” Neale said. “Some of the overseas companies are prepared to pay just to get their footprint on the resource. They have the capacity to pay a little bit more than we can. But at the end of the day, we’ve got a very good track record and I expect we’ll be able to continue to do that.”

To contact the reporter on this story: James Paton in Sydney jpaton4@bloomberg.net

To contact the editor responsible for this story: Amit Prakash at aprakash1@bloomberg.net.

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