Daily Archives: August 23, 2010

FT Energy Source

Here’s the latest from the FT’s Lex on the decision by KNOC to launch a hostile bid for Dana Petroleum:

Korea National Oil Corporation must want North Sea oil badly. Why else go hostile in its £18-a-share approach for Dana Petroleum, which values the UK-listed exploration and production group at nearly £1.9bn? The astonishing agression from the Asian state entity, which has seen similar deals slip away before because it was too timid in its approaches, has raised the stakes all around.

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Small wonder there’s a mini M&A boom at the moment –  just at look at the cost of borrowing for big, stable companies like BHP Billiton.

Citigroup reckons the $45bn credit facility put in place by the miner to finance its hostile offer for PotashCorp is likely to be just 3-4 per cent.

From Citi:

Key conclusion is that funding cost at current rates will initially be <2% (3 month LIBOR ~33bps, 1 year ~91bps), but this is likely to increase to 3-4% as the US$25b “bridge” loan is termed out to 5 to 10 year fixed rate via the corporate bonds.

We were assuming a cost of funding for the deal of closer to 5%, which would have created an annual interest bill of around $2.1bn; we estimate the above facilities could drop the cost of funding by at least $1bn in the short term.

Obviously, the 3-4 per cent figure needs to be put in the context of  sub-3 per cent 10-year US government bond yields and the Fed’s near zero interest rate.

Masa Serdarevic

Elsewhere this Monday:

- Can we solve two problems at once – unemployment and preparing for power down?

- Analysts warn of threat to oil price stability

- Peak oil alarm revealed by secret official talks

- What did we learn from the Gulf oil spill?

Masa Serdarevic

- BHP in Canadian charm offensive – FT

- Outrage at UN decision to exonerate Shell for pollution in Niger delta – Guardian

- Petrofac first-half revenue jumps 34 per cent on new orders – Bloomberg

- South Korea’s pension service in talks to invest in US oil pipeline – Bloomberg

- Dana aims to convince KNOC to raise offer – FT

- Nuclear plant’s use of river water prompts $1.1bn debate with state – NYT

- Hedge funds cut bullish gasoline bets by most since 2006 – Bloomberg

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