Anadarko Is In Talks With Shell Over Mozambique Find

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According to reports, Anadarko (NYSE:APC) could be in talks over a possible sale of its stake in the Mozambique offshore gas find to oil giant Royal Dutch Shell. [1] The offshore area 1 find in Mozambique could hold as much as 30-60 Trillion cubic feet (Tcf) of natural gas and Anadarko holds a 36.5% operating stake in the fields. The company’s stake in the find could be worth as much as $8 billion according to estimates. The talks mark growing interest in offshore exploration in East Africa, which has seen many significant discoveries over the recent past.

We have a $90 price estimate for Anadarko, which is at a 25% premium to its current market price.

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The natural gas find in the Rovuma offshore region in Mozambique is regarded as one of the most significant discoveries over the past decade. Shell was previously involved in intense bidding for stake held by Cove Energy in the field, but dropped out after a severe escalation in prices.

A stake in the Mozambique find can provide the European energy giant with a foothold in Eastern Africa, which could become a major exporter of natural gas of energy hungry markets in Asia. Anadarko on its end is reported to be apprehensive about selling is stake before the true potential of the find is determined. [1] However, the company could sell a part of its sake in a deal similar to the one recently struck for its holding in the Lucius project in the Gulf of Mexico.

For natural gas to be sold in international markets, it has to be first converted into liquid gas before being shipped. Construction of liquefying plants requires high capital expenditure and although much of the costs of the LNG terminal are to be shouldered by the Indian partners in the Romuva finds [1], Anadarko could explore the option of financing its costs by selling part of its stake. Production from his find could be a major determinant of he company’s gas production volumes.

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Notes:
  1. Shell Said to Be in Anadarko Talks for Mozambique Gas, Bloomberg [] [] []
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