Royal Dutch Shell Plc Thursday said it has offered to acquire African exploration company Cove Energy Plc for 992.4 million pounds ($1.6 billion) to get control in Mozambique, the news reports said.
The Europe’s largest oil company is offering 195 pence for each Cove share, a 26% premium to the closing price of the London-based company.
Cove Energy’s board has also said it is likely to recommend the proposed buyout. The African explorer has put itself up for sale last month after reporting one of the world’s largest gas discoveries in a decade off Mozambique.
Cove Energy has an 8.5% stake in Rovuma area 1 which holds 15 trillion to 30 trillion cubic feet of recoverable gas. The oil company is scouting for opportunities to expand further in Mozambique.
The two investors Anadarko and Eni SpA have found about 70 trillion cubic feet of gas off Mozambique. Both these operators are ready to sell stakes to share costs and reduce risks.
The premium of the proposed takeover can be compared with 22% average premium paid in oil and gas deals last year. According to the mean recoverable resource estimates, the deal will value Cove Energy at $4.1 per barrel of oil equivalent.
“The national and global oil companies have shown a lot of interest in Cove Energy, said John Martin, a Managing Director at Standard Chartered Bank. Standard Chartered Bank is advising Cove on the sale and Morgan Stanley is acting for Shell.
Royal Dutch Shell is a global oil and gas company based in Netherlands. It is the fifth-largest company in the world according to a composite measure and one of the six oil and gas super majors.