Seismic reflections: Quickest route to investor value crystallization?

Shell’s recent takeover bid for Cove Energy and the expected windfall for shareholders have again highlighted the strategy of focusing on exploration and appraisal as the quickest and most value-creating part of the E&P cycle for the investor. With frontier exploration players targeting large prospects, capex requirements are often too onerous for an independent company too bear. By focusing on the front end of the E&P cycle companies are able to extract significant value and avoid excessive equity dilution by selling out to a larger player who will take the asset to development and production.

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