Arrow Energy Ltd. (AOE.AU) said Wednesday that it is continuing to assess its options in relation to its takeover bid for Pure Energy Resources Ltd. (PES.AU) as shares in other small companies with coal seam gas assets in Queensland state soared.

Brisbane-based CSG player Pure is the subject of a takeover battle between Arrow, which happens to be Royal Dutch Shell PLC's (RDSB.LN) joint venture partner in Australia, and BG Group PLC (BG.LN).

The battle, however, appears to be drawing to a close, with BG the likely victor.

BG's A$1.03 billion bid for Pure is the highest offer on the table and Shell late yesterday said it would surrender its 11% stake in Pure into BG's A$8.25 cash per share bid.

Arrow hasn't ruled out making a higher offer for Pure but Shell's move has increased expectations that it will sell its 20% stake in Pure to BG and collect a A$200 million cash payout.

That would give Arrow more cash to develop its own assets ahead of the planned construction of Liquefied Natural Gas Ltd.'s (LNG.AU) LNG processing plant at Gladstone in Queensland, which will be fed by Arrow's gas.

Shell, along with BG, Arrow and others, also has plans to build an LNG plant at Gladstone and has already bought 30% of Arrow's local CSG reserves in the hope of securing supply.

Arrow's joint venture partner in the Tipton West CSG fields in Queensland, Beach Petroleum Ltd. (BPT.AU), with a 40% stake, has been touted as a possible second prize for Arrow if it gives up on Pure.

Beach shares ended trade Wednesday down 4.3%, or 3.5 Australian cents to 78 Australian cents but a few, much smaller companies with CSG assets in Queensland had a very good day on the market.

Shares in Melbourne-based Molopo Australia Ltd. (MPO.AU) jumped 23% or 20.5 cents to A$1.085, giving it a market value of A$198 million, after it reported "encouraging" developments at the Mungi CSG fields in Queensland's Bowen Basin.

Shares in Brisbane-based Bow Energy Ltd. (BOW.AU) jumped 26% or 13 cents to A$0.63 at day's end, giving it a market value of A$110 million, after the company certified CSG reserves in Queensland's Surat Basin.

Molopo has already cashed in on Australia's CSG rush, in December selling a stake in some New South Wales CSG assets for A$111 million to AGL Energy Ltd. (AGK.AU).

Shares in New South Wales-based CSG company Eastern Star Gas Ltd. (ESG.AU) also had a good day, gaining 14% or eight cents to A$0.65.

By Ross Kelly, Dow Jones Newswires; 61-2-8235-2957; ross.kelly@dowjones.com
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