If we don't watch out, BOW will be next.The BOW share price is...

If we don't watch out, BOW will be next.

The BOW share price is far too low.

" Arrow Energy has struck a $776 million deal with Royal Dutch Shell for the development of its coal seam gas deposits in Australia and Asia in the third significant corporate development among Australia’s coal seam gas (CSG) producers in the past week.

Arrow’s deal, negotiated over a period of nearly 12 months will see Shell take a 30 per cent stake in Arrow's Australian upstream tenements for up to $644 million and a 10 per cent stake in Arrow international subsidiary for up to $132 million.

The Brisbane-based company sees it as a key move to establish itself as the first global company specialising in coal seam gas.

The deal metrics do not scream from the rooftops in the same way as the Santos deal with Petronas. Arrow has struck its deal on a price metric of $2.60 per gigajoule of proven reserves, but describes this as conservative. Santos boasted of a price of $4.90/pj, enough for Origin Energy to call off its merger discussions with UK-based BG Group.

But Santos’ partner in the deal, Petronas, took account for anticipated drilling success – said to be very high in CSG – and said its estimation of the purchase price was 88c/pj. “It depends on whether you are on the buy side or the sell side,” says Arrow’s Stephen Bizzell.

Arrow said it had numerous approaches from other parties but decided to go with Shell because it was the world’s No 1 gas producer. Neither party used outside financial advisors on the transaction. "