Pertamina Expresses Interest in Acquiring Coastal Energy Co

on Nov 7, 2012

On November 6, the Canadian newspaper Financial Post reported that Indonesia’s state oil and gas monopoly Pertamina had expressed an interest in buying the Toronto-listed Coastal Energy Co (TSE:CEN, LON:CEO). Pertamina’s interest is part of a broader recently observed trend of foreign state-owned companies targeting Canadian oil and gas producers.

**Pertamina Interested in Buying Coastal Energy**
As indicated in a letter obtained by the Financial Post in October, Pertamina expressed an “ongoing interest in Coastal Energy” which follows an earlier expression of interest in September, related to a joint venture with the Calgary-based oil and gas company Talisman Energy Inc (TSE:TLM). This time around, however, Pertamina has indicated that it is interested in pursuing the Texas-based Coastal Energy on its own and is prepared to pay a 15 percent premium on Coastal’s share price at or around $23 (£14.36) per share, meaning that Coastal Energy’s equity will be valued at $2.6 billion (£1.6 billion). On November 6, the company’s market value was about $2.2 billion.

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The Indonesian state company is reported to be seeking the assistance of Coastal Energy’s advisor Citigroup (NYSE:C) “to complete additional due diligence which will enable us to deliver a binding proposal, subject to the framework defined within this letter.”
**Transaction Still Uncertain**
Coastal Energy, however, has noted that the Pertamina transaction is still uncertain. In a press release published on November 6, Energy Coastal said that while it continuously evaluated strategic alternatives, including the potential sale of the company so as to maximise shareholder value, “there can be no assurance that any transaction will occur.”

!m[Indonesia’s Energy Monopoly To Pursue The Oil And Gas Company On Its Own](/uploads/story/735/thumbs/pic1_inline.png)Despite Coastal Energy’s announcement, the company’s shares have jumped in London trading, rising more than nine percent on November 7. In Toronto, Coastal Energy’s stock closed more than six percent higher on November 6.
Coastal Energy, which is an international oil and gas exploration company, started trading on the Toronto Stock Exchange in 2011, and was previously listed on London’s junior AIM market. Coastal Energy’s principal assets are in Thailand and Malaysia.

**Part of the “Canadian” Trend**
In recent months, several state-owned foreign companies have targeted Canadian oil and gas producers, with the most notable example being the C$15.1 billion (£9.4 billion) bid by China’s oil and gas company CNOOC Ltd (HKG:0883, NYSE:CEO) for the Calgary-based Nexen (TSE:NXY). In addition, the Malaysian state oil company Petronas recently renewed its offer for the Toronto-listed gas producer Progress Energy Resources (TSE:PRQ), with the previous bid blocked by the Canadian government which saw the deal as unlikely to bring “net benefits” to the country. The Financial Post, however, notes that unlike other Canadian oil and gas companies, Coastal Energy does not have any Canada-based operations, meaning that the takeover bid is unlikely to come under close government scrutiny.
As noted on the company website, on July 2012, Coastal Energy entered into an agreement with Malaysia’s Petronas for the development and production of oil from the Kapal, Banang and Meranti cluster of small fields offshore Peninsular Malaysia, where it intends to hold a 70 percent equity interest.


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