Shell on 2 April announced agreement had been reached with Enterprise on the terms of a recommended cash offer of £0.725 ($1.045) a share. The offer values the UK’s largest independent oil exploration and production company at £3,500 million ($5,044 million) and represents a 15 per cent premium on the closing share price of £0.629 ($0.907) before the Easter holiday on 28 March. Shell is also set to take on Enterprise’s net debt, which stood at £800 million ($1,153 million) on 31 December.

The only significant Middle East interest of Enterprise was the South Pars gas project, one of several buy-back schemes in Iran making slow progress in recent months. Enterprise’s partner in the project is the local Petropars, a National Iranian Oil Company (NIOC)subsidiary.

The cost of the development of phases 6-8, each of which is set to produce 1,000 million cubic feet a day of gas and 40,000 barrels a day (b/d) of condensate, was initially estimated at $2,650 million. However, Enterprise recently announced that the Petropars estimate needed upward revision to guarantee reasonable returns for the foreign partner. In early February, Enterprise said that it was considering pulling out of the project if NIOC would not agree to improved contract terms by the end of March.

Analysts say that Shell is better placed to secure an attractive deal for Enterprise’s Iranian assets due to its stronger financial position. ‘Enterprise’s problem was that it could not provide cash indefinitely and that it needed returns,’ says Manouchehr Takin, a senior upstream analyst at the London-based Centre for Global Energy Studies. ‘Shell knows Iran and the company is financially strong enough to wait until it can get a good deal.’

The South Pars scheme was Enterprise’s main engagement in the Middle East. The company produces about 250,000 b/d of oil from its projects in the UK, Norway, Italy, Greece, the US and Brazil.

Shell’s involvement in Iran includes the $810 million project to develop the Soroush/Nowruz offshore oil fields, which are targeted to produce 190,000 b/d in 2003 (MEED 7:12:01). The company is also bidding to develop the large-scale onshore Bangestan oil field and is negotiating to become involved in the development of the onshore Azadegan oil field.