Britain's BG Group Wants To Take Pure Energy Resources For $800m

The all-cash bid of $6.40 a share could trump a $5.39 a share cash-scrip offer from Arrow Energy that won the conditional approval of Pure Energy directors.

In a sign it will block Arrow's plans, BG had yesterday acquired 10 per cent of Pure Energy's shares and said it would not sell them into the Arrow offer, which requires 90 per cent of shareholders to accept.

BG's bid offers Pure Energy shareholders a 19 per cent premium on the implied price of Arrow's proposal and values the explorer at almost $800 million.

Pure Energy directors said yesterday they were reviewing BG's offer and advised shareholders to take no action.

Global oil giants have poured about $20 billion into coal-seam gas companies in recent years, and yesterday's bid sets the scene for a possible showdown between two of them - BG and Shell.

Shell is Arrow's joint venture partner and had agreed to sell Arrow its 11.7 per cent stake in Pure Energy. Last year it paid $355 million for 30 per cent of Arrow's domestic gas reserves, but yesterday it was considering its options.

BG's offer raises questions about its next move into Australian coal-seam gas.

Arrow's managing director, Nick Davies, said in a statement the offer for Pure Energy was "compelling". He was not available for further comment.

The suitors are pursuing Pure Energy's gas reserves, which the target said could reach 1750 petajoules this quarter on a proved, probable and possible (3P) basis.

The senior vice-president of BG-owned Queensland Gas, David Maxwell, said the deal complemented its plans to export 7.4 million tonnes a year of liquefied natural gas from Curtis Island, but was not essential.

"It doesn't change our plans. It adds further value, increases our portfolio and gives us more opportunity to develop the LNG project and pursue domestic market opportunities," he said.

But any failure to buy Pure Energy could deal a blow to Arrow's ambitions to export LNG, as it would remove a key source of growth in its reserves position. Last week Arrow said its 3P reserves would increase by 30 per cent, from 8164 to 10,636 petajoules, if it acquired Pure Energy.

BG's bid is its third attempt to shore up coal-seam gas in Australia, after last year's failed $13.8 billion bid for Origin Energy and the $5.5 billion acquisition of Queensland Gas Company.

Pure Energy shares remained in a trading halt yesterday, while Arrow shares rose 11 per cent, to $2.48. Investors also bet the activity would spill across Queensland's southern border, boosting shares in the NSW explorers Metgasco and Eastern Star Gas by 13.4 per cent and 12.5 per cent, respectively.

Author: Ksenia Kochneva