THE WALL STREET JOURNAL

By ROSS KELLY and CYNTHIA KOONS

FRIDAY MARCH 19, 2010, 2:00 A.M. ET

SYDNEY—Arrow Energy Ltd. has yet to strike an agreement with Royal Dutch Shell PLC and PetroChina Co. on a takeover offer, people familiar with the matter said Friday amid mounting speculation of a sweetened offer from the pair.

“There is no agreement at this point,” one person said.

It has been nearly two weeks since Royal Dutch Shell and PetroChina offered 3.3 billion Australian dollars (US$3.0 billion) for Arrow’s Australian operations. The continuation of talks may cool speculation that an Arrow-endorsed deal is imminent.

Another person said it is “unlikely” a deal will be struck by the end of the day, but that anything is possible. Negotiations at this point involve “all aspects of the initial proposal”, the person said, without dismissing the possibility that a higher bid for the Australian assets could emerge.

Arrow said in a statement Friday that its shares will be halted from trading until Tuesday, or until it makes its next announcement on the offer.

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

Previously, a person involved with the talks said the separation of the domestic and international operations was a sticking point in negotiations. The original proposal would leave Arrow’s international operations in the hands of its existing shareholders.

Nik Burns, an energy analyst at RBS, said he is “very confident” of an improved bid and raised his target price on Arrow’s shares to A$5.45 from A$5.00.

Arrow hasn’t yet publicly responded to a 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% of its acreage is currently unexplored and the A$2.2 billion Fisherman’s Landing liquefied-natural-gas project in Queensland state 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.

—Aries Poon in Hong Kong contributed to this article.

Write to Ross Kelly at ross.kelly@dowjones.com

WSJ ARTICLE

Thu Mar 18, 2010 5:55pm EDT

(Reuters) – Royal Dutch Shell (RDSa.L) and PetroChina (0857.HK) are close to an agreed deal with Australia’s Arrow Energy Ltd (AOE.AX) to lift their A$3.3 billion ($3.05 billion) takeover offer, an Australian newspaper said.

The Australian Financial Review said in an unsourced report on Friday that the companies could announced a deal as soon as Friday, which could be higher than their March 8 offer for A$4.45 in cash per share Arrow share plus a share in a new entity holding its international business.

An Arrow spokesman did not immediately return calls seeking comment.

Arrow on Tuesday said it was in active talks with Shell and PetroChina, leading analysts to expect a sweetened deal.

(Reporting by Victoria Thieberger; editing by Balazs Koranyi)

REUTERS ARTICLE

Bloomberg.com

Watch

Shell’s Voser Interview

March 17 (Bloomberg) — Peter Voser, chief executive officer of Royal Dutch Shell Plc, talks with Bloomberg’s Andrea Catherwood about efforts to control spending as industry costs rise. Voser also discusses the company’s growth strategy and investments in refineries and biofuel projects. They spoke yesterday in London.

Voser Says Shell Must Control Spending as Industry Costs Rise

By Will Kennedy and Andrea Catherwood

March 17 (Bloomberg) — Royal Dutch Shell Plc Chief Executive Officer Peter Voser said industry costs have started to rise and the company will use technology to control spending as it invests $100 billion to boost production.

“Costs have not come down as much as we hoped for, and some of them are now rising again,” Voser said in an interview with Bloomberg Television broadcast today. Shell’s challenge is to be “more speedy in terms of technology implementation.”

Shell, vying with BP Plc as Europe’s biggest oil company, said yesterday it’s assessing more than 35 projects to keep production rising until 2020. Australia, where the company is developing offshore and coal-seam gas reserves, may attract as much as 40 percent of Shell’s capital expenditure. It has higher wage rates than other countries where the company operates.

“In Australia, we are doing floating LNG, which is actually fabricated in Korea, so we will be less exposed to the labor costs,” Voser said in London. We need to do “things differently in the future so that you actually save costs and get things built cheaper.”

Crude prices doubled to more than $80 a barrel in the past year, prompting producers to resume projects put on hold during the recession. Oil and gas industry spending will rise 11 percent this year to $439 billion, according to Barclays Capital. Increased investment may start to reverse reductions in drilling and engineering costs caused by the global slowdown.

Raise Production

Voser, speaking to analysts at the company’s annual strategy briefing, outlined plans to raise oil and gas production 11 percent by 2012 to 3.5 million barrels a day. The company’s capital expenditure, set at $28 billion this year, will be between $25 billion and $27 billion from 2011 to 2014.

Investment in production will be focused on three main areas, Voser said in the interview. These are Australia, the Gulf of Mexico and so-called tight gas in the U.S., where recently developed drilling techniques are used to access resources trapped between rocks.

“On top of that we have other projects in areas like Kazakhstan, like Nigeria, in the Middle East we have Iraq,” he said. “We have got a vast set of opportunities. I’m very pleased with the variety we have in the portfolio, so if one doesn’t come, we’ve got others to replace those.”

Shell yesterday announced plans to cut staff by a further 1,000 people, making the overall reduction of 7,000 in the three years through 2011. Voser has said he will cut costs by $1 billion this year, after reducing them by $2 billion last year.

The company plans to sell filling stations and oil refineries to free up capital for production spending. Shell is negotiating with India’s Essar Oil Ltd. to sell three European plants after the recession cut fuel-processing profits.

“You need bigger refineries, more complex refineries, because they can withstand recessions better than smaller refineries,” Voser said.

To contact the reporters on this story: Will Kennedy in London at wkennedy3@bloomberg.net; Andrea Catherwood in London at acatherwood@bloomberg.net.

Last Updated: March 17, 2010 05:09 EDT

BLOOMBERG ARTICLE

REUTERS

(Reuters) – Australia Arrow Energy Ltd (AOE.AX) has opened its books to Royal Dutch Shell (RDSa.L) and PetroChina (0857.HK) for them to conduct due diligence for their joint takeover offer worth at least A$3.3 billion ($3.03 billion) sources said on Wednesday.

One of the sources said Arrow is expected to make a response on the offer within days. ($1=1.088 Australian Dollar)

(Reporting by Fayen Wong; Editing by Michael Perry)

REUTERS SOURCE ARTICLE

March 17, 2010: Robin Pagnamenta Energy Editor

Royal Dutch Shell will sell full or part-stakes in as many as 9,000 petrol stations worldwide and cut a further 1,000 jobs as it intensifies its global cost-cutting.

The announcement came as Shell appeared to be edging closer to a deal with Arrow Energy to bolster the group’s position in Australia’s fast-growing industry supplying coal-seam gas to China and South-East Asia.

Peter Voser, the chief executive, said that Shell intends to leave about 30 of the 90 countries in which it operates petrol stations. The move, which is already under way, is part of a focus on more profitable markets and on exploration and production.

“We are leaving retail markets where we have low volumes,” Mr Voser told Shell’s annual strategy briefing in London. These would include Greece, Sweden, Vietnam and New Zealand.

Globally, Shell holds interests in about 45,000 petrol stations, of which just under 30,000 are operated directly by the company. Yesterday it indicated that by 2012 it would sell about 2,000 sites outright and cut the number that it operated directly by almost 7,000.

Sites no longer operated directly would follow a model that Shell has pioneered in America, where its retail sites retain the Shell brand and are supplied wholesale by the company but are operated by third parties.

Shell is selling fuel stations in Spain and Portugal. In France, it will leave many of its smaller, regional stations but plans to retain its more profitable, high-volume motorway network.

Britain, where Shell operates about 900 fuel stations and is the biggest player by volume in the retail market, is not expected to bear the brunt of the sales.

Richard Savage, of Mirabaud Securities, said that the move reflected an effort “to release capital to spend more on production”.

The announcement came as Mr Voser said that Shell expected to boost crude oil production by 11 per cent to 3.5 million barrels a day by 2012, up from 3.15 million — reversing seven years of consecutive declines. “All this is underpinned by a new wave of project start-ups,” Mr Voser said. “Beyond that we have an upstream portfolio that can grow to at least 2020.”

He also announced a further 1,000 job cuts, raising the total expected to 7,000 during 2009-11. Shell employed about 102,000 people before Mr Voser revealed the first phase of his reorganisation last July.

He called for “more focus and more urgency”, adding that most of the cuts would be in refining and marketing — which is struggling in the face of the worst industry downturn in 20 years — and in middle management. “The company had become too complicated and slower to respond than we’d like, so we are sharpening up,” he said.

The chief executive’s remarks came as Arrow Energy said that it was in “active discussions” with Shell and Petrochina over their joint $3 billion takeover offer.

Shell, which confirmed the talks but declined to comment, also announced positive news on the discovery of new supplies of oil and gas. The company said that 2009 was the “best year for exploration in a decade”, after finds in Australia and the Gulf of Mexico gave it new reserves equal to almost three times the amount of oil and gas that it produced.

Shell’s reserves at present production rates had increased from ten years at the end of 2008 to 11.9 years at the end of 2009.

TIMES ARTICLE

• Shell to quit 9,000 petrol stations worldwide

SOURCE ARTICLE

A stream of analyst comments and silence on the offer from the Australian coal-seam gas group has fuelled expectations that Arrow will reject the bid and the two parties will have to come in with a higher – and hostile – offer. Last week, Shell and PetroChina offered A$4.45 in cash for each Arrow share, plus a share in a new, international Arrow entity.

March 16, 2010

David Wighton: Business Editor’s commentary

He arrived with a bang and within weeks had axed 5,000 jobs. But eight months after taking over the helm at Royal Dutch Shell, is Peter Voser making progress turning around the supertanker?

Long derided as the most sluggish of the top oil companies, Shell will today try to persuade investors at its annual strategy briefing that it is back on course. There certainly are some encouraging signs. For six years, oil production has been drifting lower at an average of 3.5 per cent a year. But with a series of big projects due to give the figures a boost this year, production is expected to stabilise at about 3.2 million barrels a day in 2010. In 2011 it could start growing for the first time in almost a decade.

Mr Voser can claim only limited credit for this trend, which reflects years of investment. But his own changes are starting to have an impact, in particular a sweeping reordering of the company that has reduced costs and improved focus.

For years, Shell was plagued by delays and budget overruns on big projects. So far, his creation of a separate division, Projects and Technology, responsible for masterminding large-scale operations, seems to be working well. Compared with peers such as Exxon and BP, Shell has been slow to make such changes, but that means the potential for improvements is greater.

Mr Voser has promised at least another $1 billion in cost cuts this year and will provide further details today.

He is still grappling with huge challenges — not least Shell’s sprawling refining and marketing operation, which is struggling in the face of the industry’s most severe downturn in 20 years. The group’s poor record at finding new supplies of oil and gas also remains a profound problem which Voser must address.

Still, his decision to sell some of Shell’s onshore Nigerian assets and bid for Arrow Energy, an Australian producer of coal-seam gas, show that he is willing to give the portfolio a good shaking. It will be years before Mr Voser’s performance can be judged properly — but so far so good.

david.wighton@thetimes.co.uk

TIMES ARTICLE

March 15 (Bloomberg) — Arrow Energy Ltd. may reject a A$3.3 billion takeover offer from Royal Dutch Shell Plc and PetroChina Co., the Australian Financial Review reported, without saying where it got the information. The time Arrow has spent evaluating the offer and analysts’ comments that the bid is too low have led to speculation the proposal will be rejected, the newspaper said.

To contact the reporter on this story: James Paton in Sydney at jpaton4@bloomberg.net

SOURCE ARTICLE

By James Paton

March 12 (Bloomberg) — Royal Dutch Shell Plc and PetroChina Co. may need to increase their offer by as much as 55 Australian cents a share to A$3.7 billion ($3.4 billion) to acquire Arrow Energy Ltd., said an analyst at RBS Morgans.

“Shell and PetroChina may have to sweeten their offer for Arrow to as much as A$5 a share,” Nik Burns, a Melbourne-based analyst, said in a note to investors. While the companies may need to raise the bid to at least A$4.80 a share, the transaction is “more than likely to proceed,” said Burns, who predicted last month that Shell may make an offer for Arrow.

David Williams, a Shell spokesman in the Hague, and Andrew Barber, spokesman for Brisbane-based Arrow, both declined to comment.

Shell and PetroChina offered A$4.45 a share for Arrow’s Australian coal-seam gas business, the company said on March 8. That values the proposal at about A$3.3 billion. Shareholders would also get stock in a new company comprising Arrow’s international assets.

If Shell is successful, the company may move fast to acquire AGL Energy Ltd.’s coal-seam gas interests in Queensland’s Bowen Basin, potentially for A$900 million, Burns said. Sydney-based AGL may sell its 50 percent stake in the Moranbah field should Shell acquire Arrow, it said yesterday.

Shell and PetroChina may be bidding for Arrow as part of a 50-50 joint venture, according to Burns.

–Editors: Alex Devine, Raj Rajendran.

To contact the reporter on this story: James Paton in Sydney at jpaton4@bloomberg.net

To contact the editor responsible for this story: Amit Prakash in Singapore at aprakash1@bloomberg.net.

SOURCE ARTICLE