Test results de-risk Cove's Mozambique's resource estimates

Cove Energy, the east Africa-focused oil and gas company that recently put itself up for sale, said the Lagosta 2 appraisal well off the coast of Mozambique has shown the thickest gas pay to date of its current drilling campaign.

Lagosta 2, the seventh successful well to drill in the Windjammer, Lagosta, Barquentine and Camaro (WLBC) gas complex, encountered 237 net metres (777 feet) of natural gas pay in multi-zones. This is the largest pay count of any well in the WLBC gas complex so far.

Cove said results support estimated recoverable resource for the WLBC gas complex of 15 to 30 trillion cubic feet (TCF) of natural gas.

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"I am confident that after further evaluation of Lagosta 2, combined with new drilling and well testing, we will see more resource upgrades as this exciting project drives on towards final investment decision in 2013," said John Craven, the Chief Executive Officer of Cove.

To that end, the Deepwater Millennium drill-ship has arrived in Mozambique to begin an extensive testing programme that will include installing observation gauges and conducting several flow tests to further substantiate the discovered resource. It is the second drill-ship Cove has in the area.

Broker Westhouse Securities increased its estimate of gas resources in the WLBC to 20TCF, taking its estimate of gas resource for the whole block to what it terms a "conservative" 32 TCF.

"Less than two weeks after effectively putting itself up for sale, Cove's announcement this morning is a timely reminder of the world-class status of the gas project in which it has an 8.5% interest, offshore Mozambique," the broker said, as it announced an increase in its target price for the stock to 188p from 177p.

"Today's update also reinforces our view that Cove will generate significant interest from its existing partners (Anadarko and particularly Mitsui), Asian LNG [liquefied natural gas] consumers and major oil companies, such as ENI, Chevron, Statoil and BG Group, which are already established in the region," Westhouse suggested.

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