I have said previously several times that Shell will make a takeover for Arrow. Now I am not so sure..
To be honest I dont care eitherway, as long as Shell and Arrow work together to put the LNG project together. With so much competition out there, there is not one person who has said that they think that all of the four current projects will get up - five if you count LNG/AOE/Golar plan.
That said, even if Shell only achieved 30% of their 16mtpa target, you are looking at the future monetisation of around +8000PJ of gas which is significant by all accounts. Given this supply is almost certainly going to come from Arrows permits, that is both tremendous reserves growth available to them as well as throughput. Compare it to their current gross reserves, we are talking close to double MC straight up. You also need to add in the domestic market supply, the international assets and the possibility that if the 'consolidation' that everyone talks about occurs, then the AOE/LNG/Golar plant may still go ahead. phew.. talk about upside!
If you look comparitvely at what happended with the aggressive relationship BG had towards QGC, they didnt stand a chance despite QGC wanting to remain independent. The important thing to remember here is, that despite Arrow strongly stating that they wish to be the world leader in CSG, market forces are market forces and if Shell makes an offer and wants to be successful, there is not that much Arrow can do about it. New Hope is the biggest holder I think at somewhere near 15%? The door is pretty open on Arrow being taken over I think. Who says it has to be Shell. BG are just as hungry and need something like 3 or 4 times the reserves they currently have to underpin their LNG wishlist of around 15mtpa wishlist.
But to answer your question, if someone was to have a stab at Arrow right now, I think they would have to shoot at something like $5.50 a share (~$4b) as they have massive gas reserves that are unconctracted as well as some international acreage.
Whats I forgot to say on my previous post was that if Arrow and Shell want to drive towards their LNG ambition, Arrow must get to serious work on building reserves; hence my perceived need for more capital for both exploration and acquisitions.
Lets see what happens. Should be some interesting times as we head into GFC round 2 :)
All just my opinion. I dont really know whats going to happen except that over time imho Arrow is a great investment; thats why I am in!
SF
AOE Price at posting:
$3.24 Sentiment: Buy Disclosure: Held
