Arrow Energy shares bounded past $5 yesterday in the wake of a proposed offer surfacing from major shareholder, Shell, in partnership with PetroChina.
The two companies revealed a joint bid for Arrow Energy in a deal worth at least $3.3 billion, as they seek a slice of the booming coal seam gas sector.
Shares in Arrow Energy jumped more than 40% in early trading to just shy of $5 dollars, then were pushed to $5.11 by the close, a gain of 47%, or $1.63 a share,
That’s well above the offer’s implied $4.45 cash.
As well there is a hard to value share in a new entity made up of Arrow’s international business.
The cash component of the bid is the real measure; the share in the international business is all blue sky.
Some brokers the value of the international assets could total up to half a billion dollars, but that sounds back of the envelope stuff.
The news saw other coal seam gas groups take a run, with Bow Energy (see next story) soaring more than 27% along with smaller operator, LNG, which also jumped more than 26%.
Bigger players Origin and Santos, which have done deals covering their CSG assets in Queensland (with Conoco Phillips and Petronas respectively), saw their shares rise by 2%-3%.
Arrow has some of the largest coal-bed methane reserves in Queensland’s Bowen and Surat Basins.
The methane is extracted by drilling into coal seams.
It will be piped to Gladstone where it will be converted into LNG and shipped to Asia. All projects will be based around Gladstone.
Shell’s move on Arrow has been long tipped by the market, but not the involvement with PetroChina, one of China’s oil and gas majors.
The bid follows the BG Group bid for Queensland Gas Co and the ConocoPhillips and Petronas deals.
Collectively around $20 billion has been invested in various companies since 2008, with billions more being committed to exploration, proving up reserves and planning and designing the various export LNG plans for Gladstone.
At the moment there are at least four projects, there could be six, based on various announcements by different groups.
Analysts say consolidation of the competing projects is needed for them to survive. There won’t be enough capital to fund all the projects announced or mooted.
Arrow last month moved to acquire the full ownership of its $2.2 billion Fisherman’s Landing LNG project, which will be fed by coal seam gas.
Arrow’s move to sell off some of its Queensland coal interests to fund the cost of the LNG project was reported yesterday to have caused Shell to move to a full bid.
Shell already holds a 30% stake in Arrow’s domestic coal seam gas assets as well as 10% of its international business.
Arrow’s board advised shareholders to take no action on the offer and has appointed Citi and UBS as financial advisers.
The gas explorer and producer had been planning to list 20% of its Arrow International arm, retaining 70%.
