If the below story proves true – then it will bring much cheer to COVE investors as they could see a 25% premium to Shell’s initial offer placed on the table. Analysts had cited the Shell deal as being ‘generous’ after most valued COVE at around 150p per share. Clearly 245p is a very long way from 150p and perhaps yet again demonstrates just how detached analysts and brokers are from ‘real’ value.
Sovereign countries and countries that are desperate to secure strong Gas and Oil reserves will always pay a premium as the security of resources is a vital – especially with energy prices rising and Iran issues looking a long way off from showing signs of solution.
Other players under the takeover scope should benefit if a deal at 245p goes through – as well as the sector in general, which still looks very undervalued after the harsh discounts applied in 2011 due to ‘risk off’ sentiment.
An offer of 245p for COVE certainly is ‘risk off’.
Piyush Pandey, TNN | Feb 28, 2012, 03.28AM IST
MUMBAI: State-owned oil majors ONGC and GAIL plan to outbid Royal Dutch Shell and Thailand’s PTTEP with a $2-billion offer for UK’s Cove Energy, which has been put on the block.
Cove Energy has exploration and development assets in Africa. The combined bid of the Indian firms may value the London-listed firm at 245 pence, which is 11% more than the Thai rival’s offer and at an almost 20% premium to the Shell bid. OVL, ONGC’s overseas arm, and GAIL may place the offer as early as this week after necessary approvals from the Indian government, said sources familiar with the matter.
Cove Energy’s 8.5% stake in Rovuma gas fields in Mozambique with reserves of 30 trillion cubic feet and with an upside potential makes its one of the juiciest energy assets for the international oil majors. Cove energy has gas assets under development in Tanzania, Kenya.
A member of the Indian consortium told TOI, “ONGC is serious about Cove Energy. It has completed the technical due diligence and is likely to throw its hat in the ring soon. However, it will go ahead with the final bid only after getting the government’s nod.”
ONGC chairman Sudhir Vasudeva and OVL MD D K Sarraf did not answer calls made by this newspaper, while GAIL India chairman B C Tripathi was not immediately available for comment.
If ONGC bags Cove Energy, it will become the third Indian firm to join the Rovuma gas fields with an 8.5% stake. State-owned BPCL and Videocon Industries already have a 10% stake each in the gas fields. Venugopal Dhoot, chairman of Videocon Industries, told TOI, “If ONGC comes in, Indian companies will hold 28.5% and will have more say in the gigantic gas find. It will provide us economies of scale.”