Shell Takes 30% Stake in Arrow Energy

123jump.com Staff
02 Jun, 2008
New York City

A subsidiary of Royal Dutch Shell PLC signed an agreement to take a stake of 30% in Arrow Energy. Under the deal, Shell will pay $776 million. The investment from a large oil company is an indiacation of a rising interests as more power producers switch in the U.S. and Europe to cleaner burning fuel. The demand for LNG is expected to surge in the next seven years. Arrow Energy rose 14% after the deal news. Sundance Resources led the gainers in the ASX 200 index with a rise of 25%.

[R]3:00AM New York, 7:00PM Sydney – Arrow Energy surges on a deal with Royal Dutch Shell.

Market Sentiments

ASX 200 index was up 0.1% or 7.6 to close at 5,662.30. The Preliminary market turnover was 1.94 billion, worth $5.72 billion, with 554 stocks up, 711 stocks moving down and 308 unchanged. The most traded stock was Empire Oil & Gas with 252.5 million shares worth $5.7 million.

Arrow Energy surges 14% on a deal with Royal Dutch Shell

Arrow Energy and Shell Exploration Company B.V, a subsidiary of Royal Dutch Shell PLC today signed a preliminary agreement, which details a number of domestic and international transactions to be finalized by the end of the third quarter.

Under the $776 million deal, Arrow said in a statement, Shell would take a 30% interest in Arrow's Australian upstream tenements for up to $644 million and a 10% stake of Arrow International Pte Ltd which holds all of Arrow's international assets for up to $132 million.

The Australian acquisition, Arrow said, consists of a $435 million upfront payment, a $140 million payment upon final investment decision of an LNG project and an additional $70 million payment when the LNG project is producing an annualised equivalent of one million tons per annum of LNG.

Natural gas consumption around the world is expected to double in next seven years and producers are looking for ways to transport in a liquefied state. Electric power producers in the U.S. and Europe are expected to convert plants to cleaner burning fuel and to reduce their carbon emissions.

The international acquisition is made up of a $53 million upfront payment, a $27 million payment upon signing of a further production contract, a $53 million payment for certifying 5 trillion cubic feet in 2P reserves prior to the end of 2015, (reduced pro rata to $27 million if only half this amount is certified).

It also includes a 5-year option for Shell to back into any Arrow International project for 50% of Arrow's interest, by payment of 50% of back costs from 1 January 2008. This option excludes the three currently held coal bed methane licenses in India.

Shell will have the right to off-take LNG produced utilizing gas from the Arrow/Shell upstream tenements, subject to the execution of a binding agreement for such off-take, on market based terms with the LNG sellers.

Mr Davies said the deal was a company-making event for Arrow. ""Arrow has the largest CSG acreage position in eastern Australia and a growing presence in four Asian countries.

""Working with a world leading energy player like Shell will serve to make the most of our world class assets and expertise and deliver tremendous value to shareholders. This is the most significant milestone in the company's history,"" Mr Davies said.

""Shell is extremely supportive of the potential for LNG development in Queensland. This transaction is a significant endorsement of and further step in the execution of our margin enhancement strategy and will facilitate Arrow's goal to connect its large onshore gas resources with high value and strongly growing international markets,"" he said.

Gainers and losers

Of the ASX 200 index stocks, Sundance Resource led the gainers with a rise of 25.3% followed by increases in Arrow Energy Ltd of 13.8%, in AED Oil Ltd of 6.1%, in Fortescue Metals of 5.5% and in WorleyParsons of 5.2%.

Of the ASX 200 index stocks, Platinum Asset led the decliners with a fall of 8.3% followed by losses in Allco Finance Group of 6.8%, in St George Bank of 6.6%, in ABC Learning of 5.8% and in Forster's Group of 5.6%.

Centro gets another reprieve

Centro Properties Group announced today that its financiers had been granted it additional liquidity facilities to December 15 2008. The mall properties owner owes $2.3 billion to the Australian banks and $450 million to US private placement creditors.

Centro said in a statement that the US lending group had reconfirmed the extension of the US joint venture facilities to 30 September 2008.

""Certain financiers had previously provided a liquidity facility and other support to Centro totaling $55 million. Centro arranged for approximately $100 million of financing.

""Centro now has an aggregate of approximately $155 million in liquidity facilities and other financier support. These facilities will primarily be used to fund capital expenditure, adviser fees and higher lender costs incurred as a consequence of the extension arrangements,"" the group said.

Centro said ongoing fees and margins of 3.75% per annum are payable on the liquidity facilities but interest margins payable by it during the extension period would remain as previously announced.

Centro Properties shed 5.3% and Centro Retail GR was up 4.8%.

Lion Nathan acquires US wine importer

Leading Australian brewer of wine and beer, Lion Nathan Ltd today announced its acquisition of US wine importer Cumulus Wine Inc and the establishment of a new wine import company, Lion Nathan USA Inc.

The company said in a statement that the acquisition of the subsidiary of New South Wales based Cumulus Group, would provide a platform for its Australian and New Zealand premium wine portfolios in the US market.

Lion Nathan said its new US subsidiary would import wine brands such as Petaluma, St Hallet and Wither Hills as well as Cumulus brands, Rolling, Climbing and Phillip Shaw wines from the existing Cumulus Wine portfolio for onward distribution into the world's largest wine market.

Lion Nathan Wine Group Managing Director, Anthony Roberts said: ""By establishing Lion Nathan USA we can tap into the proven skills of the CWI USA sales team and create an Australasian focused portfolio of premium regional fine wines.”

Lion Nathan said the sales force of its Overland Park, Kansas based subsidiary would be led by President Ron Mertz and would service 73 states based distributors across 50 US states.

Lion Nathan's share shed 4.4%.

Just Group shoots down Premier's bid

Luxury fashion and apparel retailer, Just Group today rejected Premier's takeover bid and said that the bid undervalues the company.

In a statement today the Group said an Independent Expert's Report from Lonergan Edwards, valued Just Group at between $4.78 and $5.28 per share.

""Lonergan Edwards has indicated that Premier's offer is ""neither fair nor reasonable"". Its assessment of the value of Premier's offer consideration of between $3.97 and $4.23 per share is significantly lower than its assessed control value of Just Group shares, which has a mid-point of $5.03 per share,"" the Group said.


A directors' forecast for the year to 26 July 2008 that was included in Just Group's target's statement forecast that pro forma earnings per share to be 33.4 cents, an increase of 14% cent over the adjusted 2007 financial year.

Chairman Ian Pollard highlighted Just Group's growth potential, saying, ""Recent trading across the Just Group portfolio supports our 2008 pro forma forecast. We have also undertaken a review of Just Group's strategic plan.

""As a result, we have increased our 2010 profit goal from at least 38.4 cents EPS to at least 40 cents EPS. If achieved, this will represent double digit EPS growth on average for the remaining two years of our strategic plan.""

Gunns likely to get funding overseas, analysts

Australian based market watchers have hinted on the possibility of forestry products supplier, Gunns Ltd getting a sympathetic ear from some European banks for its $2 billion Gunns pulp mill in northern Tasmania.

The analysts' were basing their indications on the fact that the foreign banks were encouraged by the fact that the mill has a ready supply of wood.

Only Brazil and Chile have ready supply of quality wood for paper production. Gunns’ chief executive John Gay last week said the company was looking outside Australia to finance the project after ANZ refused to extend loan for the project.

Apart from generating foreign interest, the mill project has evoked the wrath of various environmental groups, which have vowed to pressure overseas banks not to fund the controversial project. The Wilderness Society and the Greens oppose the project.

Gunns' share fell 1%.

Republic Gold receives positive petrology report

Th Republic Gold today indicated that it had received a positive petrology report for the Burraga Base Metals Prospect. The board said in a statement that the report indicates that Burraga mineralisation fits what is known as the ""carbonate-base metal"" model of mineralisation.

""A number of significant mineral deposits of this style are located in the south-west Pacific Rim including Kelian, Gold Ridge, Mt. Kare, Porgera, Woodlark Island, Karangahake and Lake Cowal,"" the board said.

A petrologist report looks at samples of rock from a mineral deposit under a microscope to determine in detail what minerals compose the rock and what rock types are present.

""Because of the differing ways in which mineral bodies are formed geologically, there are common assemblages, or groups, of minerals for particular mineralisation styles. In the report on the Burraga rock samples the petrologist makes numerous technical mentions of hot hydrothermal fluids, biotite/phlogopite alteration, adularia-carbonate-silica alteration and proximity to a nearby intrusive (the source of later alteration and sulphides) and describes an alkaline trachybasalt dyke rock.

""This description fits well with the ""carbonate-base metal"" model of mineralisation, being a distal part of a porphyry system. This also adds weight to the possibility that Burraga could be a large mineralised system.

""This new knowledge can be used to better target holes for the next drilling program. The company's current strategy is to complete the relatively modest program of 5,000 to 8,000 meters previously announced to the market.”

Republic Gold Limited has recently raised a total of $9 million and has a market capitalization of nearly $75 million on the ASX.