The bidding battle for East Africa-focused oil and gas company Cove Energy is set to recommence after Mozambican regulators removed tax uncertainty over the £1bn deal.
Cove, which has the bulk of its operations in Mozambique, put itself up for sale in January, attracting suitors including Royal Dutch Shell and Thailand's PTT Exploration.
However, the sale process came to an abrupt halt last month when Esperanca Bias, Mozambique's minerals minister, said the country would slap capital gains tax on the deal.
This raised fears Cove could become embroiled in a protracted dispute over taxes as Heritage Oil did with its sale of Ugandan assets to Tullow Oil in 2010.
However, Cove issued an upbeat statement yesterday as Mozambique clarified the level of taxes it would levy on the transaction – and at a rate that was not prohibitively high.
"The effective rate to be applied to the taxable gain will be 12.8 per cent," a Cove spokesman said, adding that the formal sale process "continues". The announcement sent the company's shares up 4 per cent, or 8.75p, to 219p.
The jewel in Cove's crown is its 8.5 per cent stake in the Rovuma Area 1 block off the shore of Mozambique, a promising project that contains more than 30 billion cubic feet of natural gas.
In February, Shell had agreed terms to buy Cove Energy for nearly £1bn.
The FTSE 100 oil giant had offered to pay 195p a share for Cove, in a deal that would have valued the company at £992.4m.
If the deal had gone through, it would have handed Cove's top three executives an estimated total windfall of about $30m (£19m). Shell was advised by Morgan Stanley.Reuse content