An enterprising plan

THE surprise about the £3.5bn bid for Enterprise Oil is that it came from Shell. Italy's Eni made the initial running at the year- end, but Shell stepped in to strike a deal over the Easter weekend.

Its bold offer of 725p a share cash won the backing of the Enterprise board and may just be enough to win. It followed up by buying heavily in the market, where Enterprise soared 100p to 729p. Shell has snapped up 10.9%, including shares already in friendly hands. That half-shuts the door on rivals.

The bid was overshadowed by a surge in North Sea crude, which reached $27.60 in New York on Middle East fears, threatening to push up petrol prices.

Will anyone attempt a counterbid? Eni grandly described its offer as 'theoretical' - but could still move into the real world. A better bet might be Norway's Statoil, which has run its Scandinavian slide rule over Enterprise's juicy recent discoveries in the Norwegian North Sea.

But Shell chairman Phil Watts and finance director Judy Boynton are off to a strong start, and most will think twice before taking on the Anglo-Dutch giant. In industry terms, that would be getting into the ring with a Sumo wrestler - and one who is proving unexpectedly nimble.

The change in Shell is striking. After years staying loftily aloof from takeovers, it has got its hands well and truly dirty.

After one successful swoop (on Fletcher Challenge) and two failed ones last year, it has launched two big deals inside a week - the £1.3bn purchase of US lubricants group Pennzoil and now Enterprise, which will cost £4.3bn, including debt. This year, Watts has spent £6bn.

All this barely scratches the surface for Shell, lifting its debt gearing from 9% to a still modest 23%. When Watts outlined his strategy in February, it was reckoned he had £14bn to spend. Some fear he is overpaying for Enterprise, but that seems unlikely with crude prices surging.

Enterprise's gross cash flow in 2000 and 2001 came to £2.6bn, which hardly makes a £3.5bn bid look pricey. Crude could fall if Middle Eastern tensions ease but, sadly, that seems unlikely. Shell rose 5p to 528p.

There is an irony about this bid. Shell was tipped for years as a bidder for gas giant BG. Enterprise was born from BG's old oil assets.

Given Shell's keenness to get into gas, it could be argued that it is buying the wrong bit - especially as Enterprise sometimes seemed to have the ambitions (and costs) of Big Oil atop the output of a middle-league player. Recently, though, it has slimmed down, and its assets in secure areas of the world look highly attractive.

A string of finds off Norway strengthened its North Sea portfolio, and its latest find, the Tahiti field off the Gulf of Mexico, looks a cracker. Investec analyst Tony Alves thinks it could be worth 40p a share. Though hopes of a counterbid are low, the upside in the Gulf is tempting.

These are sad days for Enterprise staff - up to 350 could go, though some may get jobs elsewhere in Shell. Chairman Sir Graham Hearne is clearly very disappointed.

They are thin times, too, for 'independent' UK oil companies (those below giant size). Lasmo was swallowed 16 months ago; now Enterprise is following. Mark Redway, at Teather & Greenwood, says: 'The market has polarised into giants and small explorers, with no room in between.'

That matters since giants may explore less. Shell will slash Enterprise's exploration budget by 60% to £56m.

The search for the next bid target moved to BG (a big mouthful at £11bn), Cairn Energy (£450m) and Premier (£350m).

Cairn is the largest remaining UK 'independent'. Sadly, as giants rule the roost, independence is becoming a scarce commodity.