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Shell Gives Ground to BG in Battle for Pure Energy

THE WALL STREET JOURNAL

MARCH 3, 2009, 2:27 A.M. ET

By ROSS KELLY

SYDNEY — BG Group PLC has moved closer to securing control of Pure Energy Resources Ltd. after Royal Dutch Shell PLC said it would sell its 11% stake in the coal seam gas producer into BG’s 1.03 billion Australian dollar (US$651 million) offer.

Brisbane-based Pure is the subject of a bidding war between BG and Shell’s joint venture partner in Australia, Arrow Energy Ltd.

Arrow, along with Shell, and BG are among a host of companies wanting to secure CSG reserves to feed five liquefied natural gas processing plants planned for construction in Queensland state.

“Shell intends to accept BG’s offer for Pure Energy Resources in the absence of a superior offer,” a Shell spokesman said.

The move is a sign that Shell has given up on accessing CSG through Pure to support its LNG plans.

But it doesn’t mean that Shell has given up on building a large-scale LNG project in Australia and investors will be watching to see where the European energy giant turns next.

BG, which has already secured 29% of Pure, last week increased its all-cash bid for the company to A$8.25 for each Pure share, above its previous offer of A$8.00 a share, despite already having the best offer on the table.

The A$8.00-a-share offer had trumped a rival bid by Arrow of A$3.00 cash plus 1.57 of one of its shares for each Pure share.

Arrow, which already holds 20% of Pure, said Friday that it is still considering its options and hasn’t ruled out increasing its offer for Pure.

But it has been about two weeks since BG launched its A$8.00-a-share cash offer, and investors had already started to become doubtful that Arrow, a minnow compared to BG and Shell, had deep enough pockets to come back with a higher bid.

BG’s sweetened offer of A$8.25 a Pure share has a 90% minimum acceptance level.

Write to Ross Kelly at [email protected]

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