August 13, 2009 / 2:20 AM / 8 years ago

UPDATE 1-Australia's Arrow says has had talks on asset sales

* Arrow in talks to monetise some coal seam gas assets

* Dicussions included talks on a potential change of control

* Unaware if change of control proposal forthcoming (Adds analyst and company comment, share reaction)

PERTH, Aug 13 (Reuters) - Australian coal seam gas producer Arrow Energy Ltd AOE.AX has held talks over the possible sale of some of its assets, it said on Thursday, sending its shares up over 7 percent.

In a response to a stock exchange query on recent share price moves, it said it was not aware of any takeover interest after media reports that Royal Dutch Shell (RDSa.L), Arrow’s partner in Australia, and PetroChina (0857.HK), its Chinese partner, may make a bid.

Speculation has been rife in recent months that Shell may make a bid for the firm to get a larger foothold in Arrow’s coal seam gas resources in Australia, which Shell needs to underpin a proposed liquefied natural gas project in the northeastern state of Queensland.

“If Shell is serious about its coal seam gas-to-LNG ambitions, they are going to need to get a firm hold of the gas assets, and Arrow appears to be the most natural target,” said an analyst at a major investment bank who declined to be identified.

Arrow said that although it has ongoing dealings with a number of Chinese firms over its projects in China, it was not aware of any Chinese interest in Arrow.

Expectations of a sale of some assets and hopes of a takeover bid pushed Arrow’s shares up 8 percent to A$4.47 by 0213 GMT, after earlier hitting a high of A$4.53. Its shares have gained about 9.7 percent this week.

Arrow has a market value of around A$3 billion ($2.50 billion).

Shell paid A$776 million for a stake in some of Arrow’s coal-seam gas assets in 2008.

Apart from a deal to supply coal seam gas for Shell’s proposed LNG project, Arrow is also supplying gas to a smaller-scale gas export project being built by Liquefied Natural Gas Ltd (LNG.AX).

The Australian Financial Review newspaper reported on Wednesday, without citing any sources, that Arrow may finalise a liquefied natural gas (LNG) deal with Shell later this week. (Reporting by Fayen Wong, editing by Jonathan Standing)

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