Forex trading store

Arrow, Shell-PetroChina yet to agree on deal, higher bid expected

ARROW Energy is yet to strike a takeover agreement with suitors Royal Dutch Shell and PetroChina, a person familiar with the matter said today amid mounting speculation of a sweetened offer from the pair.

"There is no agreement at this point," the person said.

The person’s comments don’t discount the possibility of a higher bid emerging but may cool speculation that news of an Arrow-endorsed deal is imminent.

Arrow said in a statement today that its shares will be halted from trading until Tuesday, or until it makes its next announcement on what is currently a $3.3 billion bid for its Australian assets.

All three parties have been locked in discussions for almost two weeks and another person familiar with the matter said Wednesday they’re "working really hard to see if there’s a deal here".

Nik Burns, an energy analyst at RBS, said Friday that he is "very confident" of an improved bid and raised his target price on Arrow’s shares to $5.45 from $5.

Arrow hasn’t yet publicly responded to a $4.45-a-share cash equal joint bid from Shell and PetroChina for its Australian assets, although most analysts agree the bid undervalues the assets.

"Arrow has been in active discussions with Shell and PetroChina over the past few days, probably thrashing out a revised offer," Mr Burns said in a note to clients.

"With too much to lose on both sides if this deal falls over, we are very confident of an improved bid."

Mr Burns said Arrow needs a deal because more than 80 per cent of its acreage is currently unexplored and the $2.2bn Fisherman’s Landing liquefied natural gas project in Queensland was looking like a big ask from a funding perspective. "With no other bidder expected, maximizing the sale price should be Arrow’s primary objective," Mr Burns said.

Shell needs Arrow because it doesn’t have enough assets to back its claims that Australia is a key growth region with huge potential and PetroChina needs to secure long-term energy supplies, Mr Burns said.

A spokesman for Arrow wasn’t immediately available for comment and a spokesman for Shell said the parties are still in talks.

PetroChina spokesman Mao Zefeng declined to comment specifically on the joint bid, saying the company would issue an appropriate press release if needed.

Merrill Lynch analyst Mark Hume said on Thursday that expected aggressive growth in Chinese demand for gas makes a sweetened bid for Arrow more likely.