By James Paton
March 9 (Bloomberg) — Royal Dutch Shell Plc and PetroChina may need to increase their bid for Arrow Energy Ltd. by as much as 18 percent to A$3.9 billion ($3.5 billion) based on similar transactions in Australia, Sanford C. Bernstein & Co. said.
The oil companies may bid as much as A$5.30 a share, Neil Beveridge, a Hong Kong-based analyst at Bernstein, said in a report. Shell and PetroChina offered A$4.45 a share for Arrows Australian coal-seam gas business, the Brisbane-based company said yesterday. That values the deal at A$3.3 billion.
This is relatively cheap compared to historic deals, suggesting there may be possible upside to come for Arrow shareholders, Beveridge said in the report dated March 8.
Arrow shares rose 47 percent yesterday to A$5.11 after the announcement. The bid values Arrow at A$5 a share, given that the companys international business is worth about A$400 million, or 55 cents a share, according to Nik Burns, an analyst at RBS Morgans. Shell said yesterday that the proposal to acquire Arrow excludes the gas explorers overseas assets.
The companys shares traded at A$5.04 at 3:50 p.m. in Sydney, down 1.4 percent, compared with a gain of 0.3 percent for the benchmark S&P/ASX 200 Index.
The bid from Shell and PetroChina is one of the lowest for Australian coal-seam gas assets, according to the analyst Burns. The offer values Arrows proven and probable reserves at 88 Australian cents a gigajoule, compared with an average of A$1.88 a gigajoule for 20 offers made in Australia since 2005, he said.
Queensland Gas
The A$4.45-a-share proposal for Arrows Australian coal- seam gas assets is close to the bottom of Deutsche Banks valuation estimates, which range from A$4.35 a share to A$5.72 a share. This may be an opening bid, John Hirjee, an analyst at Deutsche Bank in Melbourne, said in a report.
Arrows Australian operations are worth more than A$6 a share, based on the price BG Group Plc paid for Queensland Gas in 2008, said John Young, an analyst at Wilson HTM Investment Group in Melbourne. Shell and PetroChina may need to boost their offer to a figure in the high $5 range to succeed, he said.
New Hope Corp., which owns almost 17 percent of Arrow, hasnt been in contact with Arrow since the announcement or made any decisions yet, Chief Executive Officer Robert Neale said by phone today. Were waiting for more information.
Phil Connole, a spokesman for Shell in Melbourne, and Mao Zefeng, a PetroChina spokesman in Hong Kong, declined to comment. Andrew Barber, a spokesman for Arrow in Brisbane, did not immediately return a phone call.
Competing Bids
Rival bids are unlikely, said most analysts, including Macquarie Group Ltd.s Adrian Wood in Sydney.
We believe a white knight is unlikely to emerge and force the offer price higher, Wood said in a report today. That said, we think Arrow has played Shells management well thus far, and a higher offer from Shell cannot be ruled out.
Shell, which already owns 30 percent of Arrows Queensland coal-seam gas holdings, plans a liquefied natural gas project on Curtis Island off central Queensland that is expected to produce as much as 16 million metric tons of LNG a year, the Hague-based company said in a document lodged with the state government last year. An acquisition of Arrow would give Shell additional reserves to underpin LNG production units in Queensland.
In addition to the cash offer, shareholders would get stock in a new company comprising Arrows international business, Arrow said yesterday. Shell has an option to acquire 50 percent of the overseas business, analysts said.
Coal-seam gas is mostly methane found on the surface of coal. The gas can be extracted when pressure on the seams is reduced, usually by removing water. LNG is gas chilled to liquid form for transportation by ship to places not linked by pipelines.
–With assistance from John Duce in Hong Kong. Editors: Alex Devine, John Chacko.
To contact the reporter on this story: James Paton in Sydney [email protected].
To contact the editor responsible for this story: Amit Prakash at [email protected].
This website and sisters royaldutchshellplc.com, shellnazihistory.com, royaldutchshell.website, johndonovan.website, and shellnews.net, are owned by John Donovan. There is also a Wikipedia segment.
Royal Dutch Shell conspired directly with Hitler, financed the Nazi Party, was anti-Semitic and sold out its own Dutch Jewish employees to the Nazis. Shell had a close relationship with the Nazis during and after the reign of Sir Henri Deterding, an ardent Nazi, and the founder and decades long leader of the Royal Dutch Shell Group. His burial ceremony, which had all the trappings of a state funeral, was held at his private estate in Mecklenburg, Germany. The spectacle (photographs below) included a funeral procession led by a horse drawn funeral hearse with senior Nazis officials and senior Royal Dutch Shell directors in attendance, Nazi salutes at the graveside, swastika banners on display and wreaths and personal tributes from Adolf Hitler and Reichsmarschall, Hermann Goring. Deterding was an honored associate and supporter of Hitler and a personal friend of Goring.
Deterding was the guest of Hitler during a four day summit meeting at Berchtesgaden. Sir Henri and Hitler both had ambitions on Russian oil fields. Only an honored personal guest would be rewarded with a private four day meeting at Hitler’s mountain top retreat.
IN JULY 2007, MR BILL CAMPBELL (ABOVE, A RETIRED GROUP AUDITOR OF SHELL INTERNATIONAL SENT AN EMAIL TO EVERY UK MP AND MEMBER OF THE HOUSE OF LORDS: 
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A head-cut image of Alfred Donovan (now deceased) appears courtesy of The Wall Street Journal.
