Africa-focused Cove Energy has divested its Tanzanian interests in order to focus on its offshore blocks in Mozambique and Kenya, the firm announced Monday, as well as help progress its strategic decision to pursue a corporate sale.
Cove said that it was transferring its 16.38-percent interest in production operations and 20.475-percent interest in exploration operations in the Mnazi Bay production sharing contract to Wentworth Resources.
In return, Cove is receiving: an increase in profit share from Rovuma Offshore Area 1 in Mozambique (through the termination of Wentworth's royalty interest of 4.95 percent over Cove's 8.5-percent share of profits derived from Area 1); two million newly-issued shares in Wentworth; and contingent payments of up to $8.5 million, depending on future natural gas production thresholds from the Mnazi Bay PSC.
Cove said that the move was an "important strategic step" for the company, particularly in light of the commencement of a formal corporate sale process, running alongside other options including the possible sale of its interest in its Area 1 exploration and production concession contract.
"This transaction is an important strategic and positive step for Cove, which I believe enhances our business going forward," said Cove Chief Executive John Craven. "The agreement with Wentworth increases Cove's share of our core asset, the Area 1 EPCC, by removal of the royalty. Also divesting our Tanzanian interests allows Cove to focus on its offshore blocks where considerable upside potential remains from the ongoing exploration and appraisal programs in both Mozambique and Kenya. Mnazi Bay was an important initial foundation for the company, but the current Mnazi Bay program better fits Wentworth's focused capabilities."
Investment bank Westhouse Securities commented that the deal will help to progress the firm's strategic decision to pursue a corporate sales. "The interest in Tanzania is, at present, underutilized and non-core," stated a note the bank's team of oil analysts.
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