Cove Energy, the commodities explorer, has dropped sharply this morning on fears it may face an unexpected tax charge.
Cove owns an 8.5% stake in the huge Rovuma gas discovery offshore Mozambique and is currently the subject of a bidding war between Shell and the Thai national energy company PTT.
Recent press reports have suggested Mozambique's minerals minister wants to impose a capital gains tax on any disposal.
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Cove says it is "seeking clarity" on the issue; it's shares had dropped nearly 11% by 10:13.
According to Merchant Securities analyst Brendan Long, "this is very upsetting news with very serious ramifications for explorers across Africa. By the standards of oil & gas tax-grabs, taxes on capital gains are the worst possible type and they are also the rarest."
"This is worse than a retroactive modification of the tax parameters because it goes against the principles of tax agreements between oil companies and host governments and leaves companies with effectively no visibility," he said.
BS
-
8 of the best houses for sale with annexesThe best houses with annexes – from a period property in the Lake District to a 13th-century house with a two-bedroom annexe in Saltwood, Kent
-
Zelenskyy moves to appease Donald Trump – what happens now?Ukraine’s president Volodymyr Zelenskyy is conceding ground to secure the least-worst deal possible, says Emily Hohler
