More CSG acquisitions in the making?
SHELL and PetroChina’s bid for Arrow Energy could well spark a new wave of consolidation in the coal seam gas sector.
The bid should not come as a surprise to anyone who has been following the dealings between the two companies, with some reading the preliminary agreement in mid-2008 for Shell to acquire stakes in Arrow’s domestic and international upstream tenements as the super-major getting a cautious foot in the CSG door before making a more concrete move.
This received a major boost when the super-major announced its own plans for a four-train coal seam gas-to-liquefied natural gas project at Curtis Island, Queensland, capable of producing up to 16 million tonnes per annum.
Shell was also reported in August last year to have made a $A3 billion bid for Arrow, though the discussions ended in a stalemate. Arrow had earlier confirmed it was in discussions with parties about options to monetise its CSG reserves.
From here, it is clear where Shell is coming from and it also makes it unlikely – in the event of a successful bid from Shell and PetroChina – that Arrow’s planned acquisition of the Fisherman’s Landing project from Liquefied Natural Gas Ltd would go ahead.
Having all of Arrow’s current proved and probable reserves of 6150 petajoules of CSG will go a long way towards feeding Shell’s planned project, and having to set aside any of that resource for Fisherman’s Landing would just detract from that.
However, the price being bandied around by Shell and PetroChina has piqued this scribe’s interest.
Analysts believe the current bid from Shell and PetroChina is simply not enough especially when compared with similar bids from BG, ConocoPhillips and Petronas for shares in QGC, Origin’s Australia Pacific LNG and Santos’s Gladstone LNG projects respectively.
The Australian reported BG paid 70c a gigajoule for QGC while Petronas paid $1.40/GJ for its share in GLNG while Conoco Phillips paid $1.30 for its stake in APLNG. This contrasts with Shell and PetroChina’s 55c/GJ bid.
The newspaper added that, based on these figures, a fair value for Arrow would be somewhere in the range of $7-10 a share rather than the $4.45 bid.
The market clearly agrees to some extent, with shares in Arrow closing at $5.11 last night.
However, should the deal close at some point between the two figures, it could prompt other major players to take a good look at the CSG juniors, some of which have reserves and resources that could boost their own figures.
This could be especially true if the final successful bid for Arrow sets an indicative price significantly lower than what Petronas and ConocoPhillips paid.
Tuesday, 9 March 2010
PNN
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