Considering that Shell are seeking reserves well in excess of Arrows current holding for their acreage, a considerable premium is applicable.
Arrow can deliver considerable growth for their holders with a good degree of certainty from their current plans for LNG and power. I can see no reason why they would need to sell out at such a low value considering their upside certainty.
Having a stab at Shells estimated resource need for 8mtpa, they are looking at around 11000+PJ in reserves to support this. If they source these from Arrows acreage alone, this gives them an acquisition cost of around $0.30/GJ from Arrow @ $3.3B. You can add a small additional finding cost to that to bring them up to the requisite 2P, but that is still a tremendously cheap acquisition cost to support such a large scale plant. If you assume that AGL were going out for $1.3 B; that is still a net acquisition cost for source gas for an 8mtpa plant of $0.40/GJ. What a steal!
Cheers,
SF
AOE Price at posting:
$5.03 Sentiment: Buy Disclosure: Held
