PTT Exploration Raises Cove Energy Offer, Topping Shell

PTT Exploration & Production Pcl (PTTEP) raised its offer for Cove Energy Plc (COV) to 1.22 billion pounds ($1.92 billion), topping Royal Dutch Shell Plc (RDSA)’s bid for access to one of the largest natural gas discoveries in a decade.

Cove, whose main asset is a stake in offshore fields in Mozambique large enough to justify building plants to freeze the fuel and ship it to Asian markets, jumped more than 11 percent to 249 pence, higher than PTTEP’s bid price.

PTTEP is now offering 240 pence per Cove share, a 9 percent premium to Shell’s bid of 220 pence. Shell, which earlier raised its offer to match PTTEP, had received approval from the Mozambique government for the takeover.

“The market is suggesting there’s going to be another counter from Shell,” said Werner Riding, an analyst at Peel Hunt in London. “It’s clear the Mozambique government prefers Shell given their large experience in liquefied natural gas.”

Cove gained as much as 25 pence, or 11 percent, as of 10:12 a.m. in London. Cove’s board today withdrew its recommendation of Shell’s bid.

“The acquisition would mark PTTEP’s entry into the highly prospective East Africa hydrocarbon province and provide PTTEP with a potentially high-impact portfolio,” Chief Executive Officer Tevin Vongvanich said in a statement. “The Rovuma project interest represents a strong fit for PTTEP.”

Photographer: Dario Pignatelli/Bloomberg

PTTEP shares dropped 4 percent to 155 baht as of 2:57 p.m. in Bangkok, poised for their lowest close since November. Close

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Photographer: Dario Pignatelli/Bloomberg

PTTEP shares dropped 4 percent to 155 baht as of 2:57 p.m. in Bangkok, poised for their lowest close since November.

Steve Harris, a London-based Shell spokesman, declined to comment on whether the company would make another offer.

‘Significant Value’

“The bid from PTTEP represents significant value for shareholders and confirms the world-class nature of Cove’s east African assets,” Cove Chief Executive Officer John Craven said in a statement.

The London-based company has an 8.5 percent interest in Rovuma Area 1, where operator Anadarko Petroleum Corp. (APC) has discovered as much as 30 trillion cubic feet of natural gas. Anadarko and Cove last week announced another discovery that may hold 7 trillion to 20 trillion cubic feet of gas.

The new find may give Shell scope to raise its offer to 300 pence a share, Investec Securities Ltd. analyst Stuart Joyner wrote in an e-mailed note.

Asia Supply

East Africa’s fields offer a fresh source of gas supply for Asia, where China and India are the world’s fastest-growing major economies. Eni SpA (ENI) of Italy, BG Group Plc (BG/) of the U.K. and Statoil ASA (STL) of Norway also discovered gas off Mozambique and Tanzania.

The deal would be the biggest overseas takeover by a Thai company, squeezing out Banpu Pcl (BANPU)’s 2010 acquisition of Australia’s Centennial Coal Co., which had an announced value of $1.85 billion, according to data compiled by Bloomberg.

PTTEP shares dropped 5.9 percent to 152 baht as of 4:30 p.m. in Bangkok, poised for their lowest close in three years. The shares of parent PTT Pcl (PTT), Thailand’s biggest company, fell 2.8 percent to 310 baht.

PTTEP’s offer is subject to government approval. Mozambique President Armando Guebuza said May 9 that the government had seen Shell’s plans for developing the country’s gas finds and “we’re pleased with what’s happening.”

Mozambique has said that the sale of Cove will be subject to a 12.8 percent capital gains tax. PTTEP’s offer for Cove excludes the 12.8 percent capital gains tax due to the Mozambique government, Vongvanich said on a conference call.

“Government approval is key for the process,” said Laura Loppacher, an analyst at Jefferies International Ltd. in London. “Shell will hold for now until they determine whether they need to raise their bid.”

To contact the reporter on this story: Brian Swint in London at bswint@bloomberg.net

To contact the editor responsible for this story: Will Kennedy at wkennedy3@bloomberg.net

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