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Wednesday, February 22, 2012

Royal Dutch Shell Proposed Offer for Cove Energy Plc



22 Feb 2012 08:39 Africa/Lagos


RDS Proposed Offer for Cove Energy plc

THE HAGUE, The Netherlands, February 22, 2012/PRNewswire-FirstCall/ --

NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, IN WHOLE OR IN PART, DIRECTLY OR INDIRECTLY IN, INTO OR FROM ANY JURISDICTION WHERE TO DO SO WOULD CONSTITUTE A VIOLATION OF THE RELEVANT LAWS OR REGULATIONS OF THAT JURISDICTION

THIS ANNOUNCEMENT IS BEING MADE UNDER RULE 2.4 OF THE CITY CODE ON TAKEOVERS AND MERGERS (THE "TAKEOVER CODE"). IT DOES NOT REPRESENT A FIRM INTENTION TO MAKE AN OFFER UNDER RULE 2.7 OF THE TAKEOVER CODE. ACCORDINGLY, THERE CAN BE NO CERTAINTY THAT ANY OFFER WILL ULTIMATELY BE MADE, EVEN IF THE PRE-CONDITION IS SATISFIED OR WAIVED.

PROPOSED CASH OFFER by Shell Exploration and Production (XL) B.V. ("Shell Bidco") (a wholly-owned subsidiary of Royal Dutch Shell plc ("Shell")) for Cove Energy plc ("Cove")

- NYSE: RDS.A

- NYSE: RDS.B

1. Highlights

- Proposed Offer of 195 pence in cash for each Cove share.*

- The Proposed Offer values the entire issued and to be issued share capital of Cove at approximately GBP992.4 million and would represent a premium of:

- 73.3 per cent. to the closing price of 112.5 pence per Cove share as of 4 January 2012, the last business day prior to Cove's announcement of the sale process for the company; and

- 28.5 per cent. to the average closing price of 151.75 pence per Cove share over the five business days ending on 21 February 2012, the last business day prior to the date of this announcement.

- The making of an announcement of a firm intention to make the Proposed Offer by Shell Bidco (the "Firm Intention Announcement") is subject to, and conditional upon, the receipt of written consent of the Republic of Mozambique's Minister of Mineral Resources (or through one or more delegated representatives) as required under Article 24.1 of the Exploration and Production Concession Contract relating to Cove's 8.5 per cent participating interest in the Mozambique Rovuma Offshore Area 1 Block (the "Rovuma Area 1 Interest"), such consent to be in a form satisfactory to Shell Bidco (the "Mozambique Consent").

- The Board of Cove believes that the level and nature of the Proposed Offer are such that it is in its shareholders' interests to progress matters with Shell Bidco to the point where such an offer can be made. Accordingly, the Board of Cove would expect to recommend the Proposed Offer of 195 pence in cash per Cove share, if made. It has been agreed that, if the Board of Cove does so recommend the Proposed Offer of 195 pence in cash per Cove share, each director of Cove will provide a hard irrevocable undertaking to accept the offer in respect of his own entire beneficial holdings of Cove shares and those of his family members and related trusts.

- Notwithstanding this announcement, the formal sale process, including the dispensations granted by the Panel on Takeovers and Mergers in connection therewith (as detailed in the announcement by Cove on 5 January 2012), shall continue.

* Pursuant to Rule 2.5(a) of the Takeover Code, Shell Bidco reserves the right to reduce the level of the consideration to be paid with the recommendation of the Board of Cove.


2. Introduction


The Boards of Cove and Shell Bidco are pleased to announce the outline terms of a proposed cash offer for the entire issued and to be issued share capital of Cove (the "Proposed Offer"). Shell Bidco is an indirect wholly-owned subsidiary of Shell.

The announcement of this Proposed Offer follows the decision announced by Cove on 5 January 2012 to conduct a formal sale process for the company. Shell Bidco is a participant in the formal sale process and, as a result of such participation, Shell Bidco and Cove are near agreement on the full terms and conditions of a recommended cash offer by Shell Bidco for Cove.

Shell Bidco is making this announcement regarding its Proposed Offer as it requires additional time to ascertain the timetable and process for obtaining the Mozambique Consent and the terms of such consent.

Notwithstanding this announcement, the formal sale process, including the dispensations granted by the Panel on Takeovers and Mergers in connection therewith (as detailed in the announcement by Cove on 5 January 2012), shall continue.

3. The Proposed Offer

The Proposed Offer is expected to be structured as a recommended cash offer from Shell Bidco to acquire the entire issued and to be issued share capital of Cove. Under the terms of the Proposed Offer, each Cove shareholder would be entitled to receive:

for each Cove share 195 pence in cash*

The Proposed Offer values the entire issued and to be issued share capital of Cove at approximately GBP992.4 million and would represent a premium of:


- 73.3 per cent. to the closing price of 112.5 pence per Cove share as of 4
January 2012, the last business day prior to Cove's announcement of the sale process
for the company; and
- 28.5 per cent. to the average closing price of 151.75 pence per Cove share
over the five business days ending on 21 February 2012, the last business day prior to
the date of this announcement.


* Pursuant to Rule 2.5(a) of the Takeover Code, Shell Bidco reserves the right to reduce the level of the consideration to be paid with the recommendation of the Board of Cove.


4. Pre-condition to making the Proposed Offer


The making of the Firm Intention Announcement is subject to, and conditional upon, the receipt of written consent of the Republic of Mozambique's Minister of Mineral Resources (or through one or more delegated representatives) as required under Article 24.1 of the Exploration and Production Concession Contract relating to the Rovuma Area 1 Interest, such consent to be in a form satisfactory to Shell Bidco (the "Pre-Condition").

Shell Bidco reserves the right to waive, in whole or in part, the Pre-Condition at any time at its sole discretion. Even if the Pre-Condition is satisfied or waived, Shell Bidco has no obligation to make the Firm Intention Announcement.


5. Position of Cove Directors


The Board of Cove believes that the level and nature of the Proposed Offer are such that it is in its shareholders' interests to progress matters with Shell Bidco to the point where such an offer can be made.

Accordingly, the Board of Cove would expect to recommend the Proposed Offer of 195 pence in cash per Cove share, if made. It has been agreed that, if the Board of Cove does so recommend the Proposed Offer of 195 pence in cash per Cove share, each director of Cove will provide a hard irrevocable undertaking to accept the offer in respect of his own entire beneficial holdings of Cove shares and those of his family members and related trusts.

Cove has agreed, for as long as the Board of Cove expects to recommend the Proposed Offer, to assist Shell Bidco in relation to obtaining any required governmental consents, including the Mozambique Consent, as soon as reasonably practicable after the release of this announcement.


6. Background to, and reasons for, the Proposed Offer


Shell's decision to announce this Proposed Offer for Cove fits with Shell's strategic aim to drive forward with its investment programme, to deliver sustainable growth and to provide competitive returns to shareholders.

East Africa is a major prospective hydrocarbon province, which has seen a significant increase in exploration activity in recent years. Shell already has interests in Tanzania, and the acquisition of Cove would mark Shell's entry into exciting new hydrocarbon provinces in Kenya and Mozambique, with significant potential for new LNG from recent gas discoveries offshore Mozambique, and further complementary exploration positions in East Africa.

In Mozambique, the Rovuma offshore basin is a frontier exploration area that holds large resources of natural gas reserves, suitable for LNG projects. According to Cove, the play represents the potential for 30+ tcf and 6 LNG trains. Shell understands that bringing these resources on stream is a strategic priority for the Mozambican Government in order to foster further economic and community development in the country, and Shell is committed to being a partner in that process.

Shell is one of the world's largest LNG producers, with one of the most diverse LNG portfolios and access to strategic global markets with equity sales volumes of 18.83 mtpa of LNG in 2011. Shell holds the largest equity share of LNG capacity among IOCs - currently holding some 20.5 mtpa of equity LNG capacity on-stream. Adding Cove's assets to Shell's portfolio would strengthen and further diversify Shell's existing global LNG portfolio of production and development projects.

Furthermore, Shell has set industry records for LNG plant construction times and operational start-ups, safely delivering projects from concept to first production for/with its partners. In joint ventures with partners, Shell currently produces LNG in Australia, Brunei, Malaysia, Nigeria, Oman, Russia and Qatar, with excellent production reliability performance achieved at all these plants.

In addition to Shell's technical expertise, its marketing and shipping know-how is designed to enable the delivery of long-term added value together with project partners. Shell has access to the key LNG markets of Europe, Asia Pacific and North America. In 2011, Shell joint ventures supplied more than 30 per cent. of global LNG volumes.

Shell would also bring its extensive project finance experience across the LNG value chain. Shell's experience in LNG project finance extends over many projects, e.g.: Oman LNG, Nigeria LNG, Qatargas 4, Sakhalin.

Shell management is confident that its innovative technologies, leading plant designs, unmatched LNG operational experience and proven commercialisation strategies, combined with the experience of the operator of the Mozambique Rovuma Offshore Area 1 Block and the joint venture partners can add significant value to the project.

7. Financing of the Proposed Offer

Shell Bidco is expecting to finance the Proposed Offer, if made, from its existing resources.

8. Sources and bases

(a) The value attributed to the fully diluted issued share capital of Cove is based on 490,995,300 Cove shares in issue and 17,917,647 Cove shares being subject to options under the share option schemes of Cove, in each case as at 21 February 2012, being the last business day prior to the publication of this announcement.

(b) The stated share prices for Cove shares have been derived from the Daily Official List and represent closing prices on the relevant date(s).

A further announcement will be made as and when appropriate.

This announcement is being made under Rule 2.4 of the Takeover Code. It does not represent a firm intention to make an offer under Rule 2.7 of the Takeover Code. Accordingly, there can be no certainty that any offer will ultimately be made, even if the Pre-Condition is satisfied or waived.

Morgan Stanley & Co. Limited ("Morgan Stanley") is acting as financial adviser to Shell Bidco and no one else in relation to the Proposed Offer and will not be responsible to anyone other than Shell Bidco for providing the protections afforded to the clients of Morgan Stanley nor for providing advice in relation to the Proposed Offer, the contents of this announcement or any other matter or arrangement referred to herein.

Standard Chartered Bank ("Standard Chartered"), which is authorised and regulated in the United Kingdom by the Financial Services Authority, is acting exclusively for Cove and for no one else in connection with the Proposed Offer and will not be responsible to anyone other than Cove for providing the protections afforded to clients of Standard Chartered nor for giving advice in relation to the Proposed Offer or any matter or arrangement referred to in this announcement.

Cenkos Securities plc ("Cenkos Securities"), which is authorised and regulated in the United Kingdom by the Financial Services Authority, is acting exclusively for Cove as nominated adviser and broker and is not acting for or advising any other person and accordingly will not be responsible to any person other than Cove for providing advice in relation to the contents of this announcement. Neither Cenkos Securities nor any of its affiliates owes or accepts any duty, liability or responsibility whatsoever (whether direct or indirect, whether in contract, in tort, under statute or otherwise) to any person who is not a customer of Cenkos Securities in connection with this announcement, any statement contained herein or otherwise.

Further information

This announcement is for information purposes and is not intended to, and does not, constitute or form part of any offer, invitation or the solicitation of an offer to purchase, otherwise acquire, subscribe for, sell or otherwise dispose of, any securities.

This announcement has been prepared in accordance with English law, the Takeover Code and the rules applicable to companies whose shares are traded on the AIM market of the London Stock Exchange, and information disclosed may not be the same as that which would have been prepared in accordance with the laws of jurisdictions outside England.

The release, publication or distribution of this announcement in jurisdictions other than the United Kingdom may be restricted by law or regulation and therefore persons into whose possession this announcement comes should inform themselves about and observe such restrictions. Any failure to comply with these restrictions may constitute a violation of securities laws of any such jurisdictions. To the fullest extent permitted by law, Shell Bidco disclaims any responsibility or liability for the violation of such restrictions by such persons.

Shell Bidco reserves the right to elect with the agreement of Cove and the consent of the Panel (where necessary) to implement the proposed acquisition of the entire issued and to be issued share capital of Cove by way of a court-approved scheme of arrangement in accordance with Part 26 of the Companies Act 2006.

Definitions and cautionary statement

Resources: Our use of the term "resources" in this announcement includes quantities of oil and gas not yet classified as Securities and Exchange Commission of the United States ("SEC") proved oil and gas reserves or SEC proven mining reserves.- Resources are consistent with the Society of Petroleum Engineers 2P and 2C definitions.

The companies in which Royal Dutch Shell plc directly and indirectly owns investments are separate entities. In this announcement "Shell", "Shell Group" and "Royal Dutch Shell" are sometimes used for convenience where references are made to Royal Dutch Shell plc and its subsidiaries in general. Likewise, the words "we", "us" and "our" are also used to refer to subsidiaries in general or to those who work for them. These expressions are also used where no useful purpose is served by identifying the particular company or companies. "Subsidiaries", "Shell subsidiaries" and "Shell companies" as used in this announcement refer to companies in which Shell either directly or indirectly has control, by having either a majority of the voting rights or the right to exercise a controlling influence. The companies in which Shell has significant influence but not control are referred to as "associated companies" or "associates" and companies in which Shell has joint control are referred to as "jointly controlled entities". In this announcement, associates and jointly controlled entities are also referred to as "equity-accounted investments". The term "Shell interest" is used for convenience to indicate the direct and/or indirect (for example, through our 24 per cent. shareholding in Woodside Petroleum Ltd.) ownership interest held by Shell in a venture, partnership or company, after exclusion of all third-party interest.

This announcement contains forward-looking statements concerning the financial condition, results of operations and businesses of Shell and the Shell Group. All statements other than statements of historical fact are, or may be deemed to be, forward-looking statements. Forward-looking statements are statements of future expectations that are based on management's current expectations and assumptions and involve known and unknown risks and uncertainties that could cause actual results, performance or events to differ materially from those expressed or implied in these statements. Forward-looking statements include, among other things, statements concerning the potential exposure of Shell and the Shell Group to market risks and statements expressing management's expectations, beliefs, estimates, forecasts, projections and assumptions. These forward-looking statements are identified by their use of terms and phrases such as "anticipate", "believe", "could", "estimate", "expect", "goals", "intend", "may", "objectives", "outlook", "plan", "probably", "project", "risks", "seek", "should", "target", "will" and similar terms and phrases. There are a number of factors that could affect the future operations of Shell and the Shell Group and could cause those results to differ materially from those expressed in the forward-looking statements included in this announcement, including (without limitation): (a) price fluctuations in crude oil and natural gas; (b) changes in demand for Shell's products; (c) currency fluctuations; (d) drilling and production results; (e) reserves estimates; (f) loss of market share and industry competition; (g) environmental and physical risks; (h) risks associated with the identification of suitable potential acquisition properties and targets, and successful negotiation and completion of such transactions; (i) the risk of doing business in developing countries and countries subject to international sanctions; (j) legislative, fiscal and regulatory developments including regulatory measures addressing climate change; (k) economic and financial market conditions in various countries and regions; (l) political risks, including the risks of expropriation and renegotiation of the terms of contracts with governmental entities, delays or advancements in the approval of projects and delays in the reimbursement for shared costs; and (m) changes in trading conditions. All forward-looking statements contained in this announcement are expressly qualified in their entirety by the cautionary statements contained or referred to in this section. Readers should not place undue reliance on forward-looking statements. Additional factors that may affect future results are contained in Shell's 20-F for the year ended 31 December 2010 (available at http://www.shell.com/investor and http://www.sec.gov ). These factors also should be considered by the reader. Each forward-looking statement speaks only as of the date of this announcement, 22 February 2012. Neither Shell nor any of its subsidiaries nor the Shell Group undertake any obligation to publicly update or revise any forward-looking statement as a result of new information, future events or other information. In light of these risks, results could differ materially from those stated, implied or inferred from the forward-looking statements contained in this announcement.

Shell may have used certain terms, such as resources, in this announcement that the SEC strictly prohibits Shell from including in its filings with the SEC. U.S. investors are urged to consider closely the disclosure in Shell's Form 20-F, File No 1-32575, available on the SEC website http://www.sec.gov. You can also obtain these forms from the SEC by calling 1-800-SEC-0330.

This announcement, including information included or incorporated by reference in this announcement, may contain "forward-looking statements" concerning the Cove and its subsidiaries (the "Cove Group"). Generally, the words "will", "may", "should", "continue", "believes", "expects", "intends", "anticipates" or similar expressions identify forward-looking statements. The forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from those suggested by them. Many of these risks and uncertainties relate to factors that are beyond the company's abilities to control or estimate precisely, such as future market conditions and the behaviours of other market participants, and therefore undue reliance should not be placed on such statements which speak only as at the date of this announcement. The Cove Group does not assume any obligation to, and do not intend to, update these forward-looking statements, except as required pursuant to applicable law.

Nothing in this announcement is intended, or is to be construed, as a profit forecast or to be interpreted to mean that the earnings per Shell share or Cove share for the current or future financial years will necessarily match or exceed the historical published earnings per Shell share or Cove share (as the case may be).

Notice to United States investors

The Proposed Offer, if made, will be made for securities of a UK company and Cove shareholders in the United States should be aware that this announcement and any other documents relating to the Proposed Offer have been or will be prepared in accordance with the Takeover Code, the AIM Rules and UK disclosure requirements, format and style, all of which differ from those generally applicable in the United States. Cove's financial statements and all financial information that is included in this announcement, or that may be included in the formal offer documentation or any other documents relating to the Proposed Offer, have been or will be prepared in accordance with International Financial Reporting Standards and may not be comparable to the financial statements or other financial information of US companies.

The Proposed Offer, if made, will be for the securities of a non-US company which does not have securities registered under Section 12 of the US Securities Exchange Act of 1934, as amended (the "US Securities Exchange Act"). The Proposed Offer, if made, will be made in the United States pursuant to Section 14(e) of, and Regulation 14E under, the US Securities Exchange Act, subject to the exemptions provided by Rule 14d-1 under the US Securities Exchange Act and otherwise in accordance with the requirements of the Takeover Code. Accordingly, the Proposed Offer, if made, will be subject to disclosure and other procedural requirements, including with respect to withdrawal rights, offer timetable, settlement procedures and timing of payments that are different from those applicable under US domestic tender offer procedures and laws. In the United States, the Proposed Offer, if made, will be deemed made solely by Shell Bidco and not by any of its financial advisers.

In accordance with and to the extent permitted by the Takeover Code, normal UK market practice and Rule 14e-5 under the US Securities Exchange Act, Shell Bidco or its nominees, or its brokers (acting as agents) or their respective affiliates may from time to time make certain purchases of, or arrangements to purchase, Cove shares outside the United States, other than pursuant to the Proposed Offer, before or during the period in which the Proposed Offer, if made, remains open for acceptance. These purchases may occur either in the open market at prevailing prices or in private transactions at negotiated prices. Such purchases, or arrangements to purchase, will comply with all applicable UK rules, including the Takeover Code and the rules of the London Stock Exchange, and Rule 14e-5 under the US Securities Exchange Act to the extent applicable. In addition, in accordance with, and to the extent permitted by, the Takeover Code, normal UK market practice and Rule 14e-5 under the US Securities Exchange Act, Morgan Stanley and its respective affiliates will continue to act as exempt principal traders in Cove shares on the London Stock Exchange and engage in certain other purchasing activities consistent with their respective normal and usual practice and applicable law. Any information about such purchases will be disclosed on a next day basis to the Panel and will be available to all investors (including US investors) from any Regulatory Information Service including the Regulatory News Service on the London Stock Exchange website, http://www.londonstockexchange.com.

It may be difficult for US holders of Cove shares to enforce their rights and any claim arising out of the US federal securities laws, since Shell Bidco and Cove are incorporated under the laws of countries other than the United States, and some or all of their officers and directors may be residents of countries other than the United States. US holders of Cove shares may not be able to sue a non-US company or its officers or directors in a non-US court for violations of the US securities laws. Further, it may be difficult to compel a non-US company and its affiliates to subject themselves to a US court's judgment or jurisdiction.


Disclosure requirements of the Takeover Code


Under Rule-8.3(a) of the Takeover Code, any person who is interested in one-per-cent. or more of any class of relevant securities of an offeree company or of any paper offeror (being any offeror other than an offeror in respect of which it has been announced that its offer is, or is likely to be, solely in cash) must make an Opening Position Disclosure following the commencement of the Offer Period and, if later, following the announcement in which any paper offeror is first identified. An Opening Position Disclosure must contain details of the person's interests and short positions in, and rights to subscribe for, any relevant securities of each of (i) the offeree company, and (ii) any paper offeror(s). An Opening Position Disclosure by a person to whom Rule-8.3(a) applies must be made by no later than 3.30-p.m. (London time) on the tenth business day following the commencement of the Offer Period and, if appropriate, by no later than 3.30-p.m. (London time) on the tenth business day following the announcement in which any paper offeror is first identified. Relevant persons who deal in the relevant securities of the offeree company, or of any paper offeror prior to the deadline for making an Opening Position Disclosure must instead make a Dealing Disclosure.

Under Rule 8.3(b) of the Takeover Code, any person who is, or becomes, interested in one per cent. or more of any class of relevant securities of the offeree company or of any paper offeror must make a Dealing Disclosure if the person deals in any relevant securities of the offeree company or of any paper offeror. A Dealing Disclosure must contain details of the dealing concerned and of the person's interests and short positions in, and rights to subscribe for, any relevant securities of each of (i) the offeree company and (ii) any paper offeror, save to the extent that these details have previously been disclosed under Rule-8. A Dealing Disclosure by a person to whom Rule 8.3(b) applies must be made by no later than 3.30 p.m. (London time) on the business day following the date of the relevant dealing.

If two or more persons act together pursuant to an agreement or understanding, whether formal or informal, to acquire or control an interest in relevant securities of an offeree company or any paper offeror, they will be deemed to be a single person for the purpose of Rule 8.3.

Opening Position Disclosures must also be made by the offeree company and by any offeror and Dealing Disclosures must also be made by the offeree company and any other offerors and by any persons acting in concert with any of them (see Rules 8.1, 8.2 and 8.4).

Details of offeree and offeror companies in respect of whose relevant securities Opening Position Disclosures and Dealing Disclosures must be made can be found in the Disclosure Table on the Panel's website at http://www.thetakeoverpanel.org.uk, including details of the number of relevant securities in issue, when the Offer Period commenced and when any offeror was first identified. If you are in any doubt as to whether you are required to make an Opening Position Disclosure or a Dealing Disclosure, you should contact the Panel's Market Surveillance Unit on +44 (0)20 7638 0129.

Publication on websites

A copy of this announcement will be made available free of charge, subject to certain restrictions relating to persons resident in certain restricted jurisdictions, on Shell's website at http://www.shell.com/home/content/investor/ [http://www.shell.com/home/content/investor ] and Cove's website at http://www.cove-energy.com by no later than 12-noon on 23 February 2012.


Enquiries

Shell
Shell Media Relations
+44-207-934-5550
+31-70-377-8750

Shell Investor Relations
Europe - +31-70-377-3996
United States - +1-713-241-2069

Morgan Stanley & Co. Limited (Financial adviser to Shell Bidco)
Michael O'Dwyer
Ian Hart
Andrew Foster - Corporate Broking
+44-207-425-8000

Cove
Michael Blaha - Executive Chairman - +44-20-3008-5260
John Craven - CEO - +353-1-662-4351
Michael Nolan -Finance Director - +353-1-662-4351

Standard Chartered (Financial adviser to Cove)
Amer Baig
Geraldine Murphy
Rob Tims
Hein Pieter Boers
Aditya Yadav
+44-20-7885-8888

Cenkos Securities plc (Nominated adviser and broker to Cove)
Jon Fitzpatrick - +44-20-7397-8900
Ken Fleming - +44-13-1220-6939
Joe Nally (Corporate Broking) - +44-20-7397-8900

FTI Consulting (Cove Media Relations)
Billy Clegg
Edward Westropp
+44-20-7831-3113


Source: Royal Dutch Shell plc

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