Cove energy auction is boosted by huge gas find

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The Independent Online

The action-packed auction of east Africa-focused oil and gas explorer Cove Energy took another turn yesterday as a key prospect in Mozambique announced a massive new find.

Less than three weeks after Cove looked to have put an end to a protracted bidding battle by agreeing to a £1.12bn takeover by Shell, the company struck a gas field that significantly transforms its prospects.

The discovery boosts the maximum amount of recoverable gas in the so-called Rovuma Area 1 block joint venture off the shore of Mozambique, the jewel in Cove's crown in which it has a 7.5 per cent stake, by 20 trillion cubic feet to 50 trillion cubic feet.

This raised the prospect that Shell would need to boost its offer for Cove, in a move that would increase the windfall of its three top executives, the chief executive John Craven, chairman Michael Blaha and the finance director Michael Nolan.

The move sent Cove's shares up by 4.5p, or 2.0 per cent, to 228p.

This is comfortably ahead of Shell's 220p-a-share bid, signalling that the market believes that if Shell doesn't raise its offer, a rival suitor would step in. Thailand's PTT Exploration and Production, which already outbid Shell once at an earlier stage in the auction, forcing the FTSE 100 giant to raise its offer, is considering making a higher offer for Cove.

The Thai company has not yet made a final decision.

Two state-owned Indian groups, Oil and Natural Gas Corp and Gail India, are also thought to have considered making a joint bid for Cove.

Big oil companies including Exxon Mobil, Norway's Statoil and UK-based BG Group have begun exploring around the eastern coast of Africa in recent years, targeting major gas reserves.