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Oil firms swoop on Fletcher Energy

By Michele Simpson

Friday 28th July 2000

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Todd Energy has declared itself out of the running to buy Fletcher Energy but as the sale deadline looms other potential buyers are in town working on the deal.

While the company's management is thought to be lobbying to keep Fletcher Energy out of foreign hands, offshore companies are here to put their proposals together to buy the listed energy stock.

Shell, a partner with Fletcher Energy in the Maui project - the country's largest oil, gas and condensate resource - this week repeated statements confirming it is still interested in buying the FCL energy letter stock.

But FCL's other major partner in Maui, Todd Energy, has signalled it is out of the running.

Todd Energy managing director Richard Tweedie discounted speculation the company could be mounting a bid with Australian-listed energy company Santos.

Santos has concentrated most of its investment in Australia in oil and natural gas and has been aggressive in that market. Most of its production comes from the Western Australian offshore basin Carnarvon. It bought oil fields in the area from Royal Dutch/Shell Group last year.

Mr Tweedie said of any potential Todd interest in buying Fletcher Energy: "We wouldn't be interested. All we would be doing would be getting much of the same but on a larger basis."

Todd, Shell and Fletcher Energy are also in joint deals with Pohokura-1 well.

"We're not interested in Canada or Brunei," Mr Tweedie said of Fletcher Energy's investment offshore.

Oil giant Chevron has also been suggested as a possible buyer. Chevron this week announced its second-quarter earnings rose to $US1.14 billion.

The company's chairman and chief executive Dave O'Reilly said Chevron's strength came from its exploration and production business with its worldwide oil and gas production rising 2% from a year ago.

New York Stock Exchange- listed Unocal Corporation already has a relationship with Fletcher Energy through a Brunei venture.

A licence block being explored in Brunei is 27% owned by Fletcher Energy and 27% by Unocal, with the remaining interest held by Brunei people.

Unocal, an oil and gas company, has this month announced it is spending about $US350 million on gas interests in the Gulf of Thailand and planned to spend $US200-$US300 million in other offshore natural gas- exploration projects.

Apache Energy & Minerals has also been suggested as a possible suitor. Part of US-based Apache Corp, the company had initially been interested in Shell Australia's upstream assets for sale in the Carnarvon Basin last year.

Shell has this year sold a portfolio of Australian, New Zealand and Iranian upstream assets in exchange for 429 million new shares in Woodside Petroleum. Included in the deal is Shell's 18.75% stake in Maui, a 50% share of Kapuni gas field, 18.3% of Pohokura and 49% of Maari oil field.

Shell has now closed the door on any further comment on its interest in Fletcher Energy. New Zealand Shell chairman Ed Johnson said the matter was commercially sensitive.

Analysts said Shell would be the most obvious suitor, given its relationship with Fletcher Energy and its retail service-station chain in New Zealand. "I guess [FCL] would prefer a trade sale and we'd have to see the share price up around $8-$9 before they let it stand alone," one energy analyst said.

Fletcher Energy spokesman Stephen Jones said the FCL board hoped to make a decision on the company's future by the end of the year.

The FCL board is meeting next month with Fletcher Energy and a possible sale would be on the agenda.

Fletcher Energy's share price has been steadily rising since the beginning of the year from about $4 to more than $7.50 but has in the past week dipped slightly to $7.14 at close of trading on Wednesday.

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