AGL next on gas radar for Shell and PetroChina
ROYAL Dutch Shell and PetroChina's joint tilt for Arrow Energy could be followed up by a $1.3 billion bid for AGL Energy's Queensland coal seam gas assets as the majors extend their grab for reserves.
Shell and PetroChina want to gain a hold over enough reserves to underpin two liquefied natural gas trains at Gladstone.
It is understood that if successful with the Arrow takeover, Shell and PetroChina have agreed to jointly pursue a two-train project at Curtis Island to produce 7.4 million tonnes of LNG exports a year, supplied at least in part by Arrow's CSG acreage.
Arrow, which was forced to cancel a London and New York roadshow this week because of the $3.3bn joint bid lobbed late last Friday, was last night still weighing up the cash offer against its plans to buy LNG Ltd's Fisherman's Landing LNG project.
Credit Suisse analyst Sandra McCullagh said if the deal went ahead, AGL might consider selling reserves at its 50 per cent-owned Moranbah CSG project in Queensland's Bowen Basin.
Arrow is the operator of Moranbah, with 35 per cent. Shell owns the remaining 15 per cent.
Ms McCullagh said that under Shell, which would become the operator, the Moranbah reserves would probably be directed to LNG, a business AGL had previously said it was not keen to be in. "This would likely see the assets become non-core to AGL, which could be the catalyst for AGL to sell out of the project," she said.
Based on metrics from the Arrow proposal, a sale of the acreage, which has about 2000 petajoules of 3P -- or proven, probable and possible -- reserves, could fetch $1.3bn, Credit Suisse said.
An AGL spokesman said no offer had been received.
While Credit Suisse said Shell and PetroChina might be able to achieve a discount for AGL's Moranbah stake because of a lack of other bidders, the big part Moranbah plays in AGL's plans to shore up 2000PJ of proven and probable, or 2P, reserves (it currently makes up 500PJ) might not make it an eager seller.
Shell and PetroChina want to take Arrow over through a scheme of arrangement, which would require an Arrow shareholder meeting to approve it if the target's board agrees.
Shell, which is seeking government approval to eventually build four LNG trains at Gladstone, previously said it wanted first LNG from Curtis Island in 2015.
To underpin the two trains, Shell and PetroChina would need about 10,000PJ of 2P gas reserves.
If the pair acquire Arrow, they will have 5271PJ of 2P reserves (including the 30 per cent of Arrow's acreage Shell acquired last year), meaning they will need to explore further or acquire new ground.
It is understood talks to finalise the Fisherman's Landing deal, for which a heads of agreement was signed in January, have been stalled by Arrow until it decides whether to accept the takeover.
Arrow stock eased yesterday, slipping 9c to $5.02. This is 57c higher than Shell's $4.45-a-share cash bid, which does not include Arrow's international assets.
Analysts have valued the international assets at 55-75c a share.
Most analysts say there is little chance of another bidder emerging but they are mixed on whether Arrow will be able to extract more out of Shell and PetroChina.
Wednesday 10 March, 2010
The Australian
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