Hi Ladies and Gents Here is the article from Bloomberg:Arrow...

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Here is the article from Bloomberg:

Arrow Drop May Prompt Shell to Bid, RBS Morgans Says (Update1)
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By James Paton

Feb. 12 (Bloomberg) -- Arrow Energy Ltd.s 22 percent drop in Sydney trading since August and a gain in its reserves may prompt renewed speculation of a takeover by coal-seam gas partner Royal Dutch Shell Plc, RBS Morgans said.

Arrow has increased its gas reserves by more than 40 percent since last year to feed proposed liquefied natural gas plants in Queensland, likely giving Shell more confidence in the Australian explorer, Nik Burns, an analyst at RBS Morgans in Melbourne, said by phone. Shell may need to pay a reasonable premium, Burns said, declining to estimate a price.

There was a lot of speculation last year that Shell was interested in potentially taking out Arrow, but my view was that the share price had run too high, too quickly for Shell to offer a premium, given where Arrow was in delineating their coal-seam gas resource, Burns said today. Buying Arrow now could give Shell gas to feed multiple LNG production units, he said.

Speculation of a takeover bid contributed to a 55 percent increase in Arrow shares last year. The Hague-based Shell, which owns a 30 percent stake in Arrows coal-seam gas holdings in Queensland and 10 percent of its international unit, made a A$3 billion ($2.7 billion) offer for Arrow, with talks ending in stalemate, Londons Sunday Telegraph reported in August.

Arrow spokesman Andrew Barber declined to comment, saying only that the companys focus is to develop one or more LNG production units. Phil Connole, a spokesman for Shells Australian operations in Melbourne, declined to comment.

Potential Takeover

The Australian gas explorer said Aug. 13 that talks with companies about its coal-seam gas assets included discussions about a potential takeover, but that it hadnt received an offer.

The shares rose 3.1 percent to A$3.65 in Sydney trading today, valuing the company at about A$2.7 billion, while the benchmark S&P/ASX 200 Index gained 0.2 percent. The stock is 22 percent below its Aug. 24 close of A$4.67.

Arrow said yesterday it reached an agreement with Liquefied Natural Gas Ltd. to acquire 100 percent of the Fishermans Landing venture in Queensland and estimated the development costs at as much as A$2.2 billion. The project is one of five proposed in the state aiming to tap gas extracted from coal seams for conversion to liquid form and export to Asia.

Arrow may consider selling a stake of as much as 19 percent in the Fishermans Landing project for A$800 million, Burns said in a report.

BG, Santos

Potential buyers include BG Group and Santos Ltd., which plan their own Queensland LNG ventures. Shell and Japanese trading company Toyota Tsusho Corp., which agreed in 2009 to buy 1.5 million tons of LNG a year from the Arrow project, may also be interested in a holding, he said.

The Australian company may delay a decision to approve the Fishermans Landing project until the middle of 2010, analysts at RBS Morgans and Credit Suisse said.

Arrows accord to buy all of the project may mean it will make a final investment decision later than its prior target of March 31, the Brisbane-based explorer said yesterday. The estimated date for first LNG production remains late 2012, it said.

Arrow said it would consider bringing in strategic investors to help fund the venture. The company has said it may sell a stake, take on debt or offer shares. Arrow may sell as much as A$400 million of shares, Andrew Williams and Jenny Wong, analysts at Credit Suisse in Melbourne, said in a report.

The increase in reserves may help support further growth opportunities, including a potential second processing unit at Fishermans Landing and the supply of gas to Shells proposed Curtis Island LNG project, Arrow said last month. Origin Energy Ltd. and ConocoPhillips also plan a Queensland LNG venture.

To contact the reporter on this story: James Paton in Sydney [email protected].