Cove bosses seeking Celtic success

Any IC readers who have profited from the offshore activities of Cove Energy in Mozambique may soon want to cast their eyes towards Irish waters. Terra Energy, an oil & gas venture backed by a trio of Cove directors, including chief executive John Craven, has reversed into an Aim shell company – Sterling Green – for an aggregate consideration of around £7.5m to be satisfied by the issue of 64.1m new shares, together with the payment of an additional €10,000 (£8,011).

This new entity - to be renamed ‘Fastnet Oil & Gas’ - has raised £10m through a “heavily oversubscribed” institutional placing at 11p a share. The funds will be used to secure existing early-stage exploration and production opportunities in blocks located off Ireland’s southern coast within the Mizzen, Molly Malone and Fastnet basins - three licence applications are currently pending. The new company, which is to be headed by current Cove non-executive Stephen Staley, will also be looking for more familiar prospects in north and east Africa.

Notice of the reverse takeover came a day before Cove and its partner in Mozambique - Anadarko Petroleum - announced yet another major deepwater gas find in the offshore Rovuma Basin. Drilling at the Golfinho discovery well, in which Cove holds an 8.5 per cent stake, encountered more than 193 net feet of natural gas in two “high-quality” Oligocene fan systems. Golfinho, which is 20 miles north-west from the existing Prosperidade Complex, tested at 100m cubic feet a day. As operator, Anadarko estimates that the Golfinho area now holds anything from 13-45 trillion cubic feet (tcf) of gas, and has added 7-20 tcf in recoverable gas resources. This is in addition to the existing Prosperidade recoverable gas resource of 17-30 tcf.

Given the size of Cove’s new gas accumulation, which is geologically independent of the Prosperidade Complex, it will invariably have a material effect on the company’s valuation. Cove is currently subject to a 220p takeover bid by Royal Dutch Shell that has been approved by the company’s board, but its share price has moved up to 228.5p on the news, which suggests some shareholders are betting on a counter bid or renegotiated offer.

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