Cove Farm-In to Offshore Kenya
Cove has concluded a conditional farm-in agreement with Dynamic Energy Exploration and Production Corporation ("DEPCO") to acquire a 15% participating interest in five contiguous deepwater blocks L5, L7, L11A & B and L12 (the "Blocks") covering an area of over 30,500 sq kms, offshore Kenya, East Africa. The five Blocks are held in a Joint Venture by Dynamic Global Advisors Kenya Limited, a wholly owned subsidiary of DEPCO with a 30% interest (15% after farmout)and Anadarko Kenya Company, an affiliate of Anadarko Petroleum Corporation ("Anadarko"), the operator of the blocks with a 70% interest.
- Extensive contract area - approximately 30,500 sq km (7.5 million acres) over the entire deepwater fairway offshore Kenya, more than three times the size of the Company's Area 1 Offshore Mozambique block.
- Diversity of hydrocarbon play types - typical deepwater hydrocarbon plays such as turbidite fan/channels in a number of structural and stratigraphic trapping situations are evident from existing seismic data and are similar to those identified offshore Mozambique.
- Evidence of working petroleum systems - adjacent shallow water and onshore wells have oil and gas shows together with active oil seeps on Pemba Island near the southern part of the contract area.
- Recent extensive 2 D seismic - over 5000 line kilometers of modern 2 D seismic has been acquired in 2010.
- Experienced Operator - Anadarko has considerable offshore Africa deepwater exploration experience and has enjoyed notable success in Ghana (Jubilee) and Mozambique (Windjammer).
- Drilling Continuity for Cove - drilling on the Kenya blocks is expected to commence in 2012/13 and is planned to follow the ongoing 2010/11 Mozambique offshore exploration program ensuring continual drilling activity for Cove in East Africa deepwater basins.
- Provides synergy between DEPCO and Cove combining DEPCO's knowledge and strategic data - base in a number of emerging plays offshore Africa with Cove's experienced technical and financial strengths. Both companies will seek to co-operate in future ventures.
Cove is paying US $15.5m (the "Consideration") inclusive of acquisition costs, a reimbursement of DEPCO's past expenditure on the blocks and funding for Cove's and DEPCO's forward work program during the first exploration phase which extends to June 2012. US $10.5m of the Consideration is payable in cash with the balance of US $5m in Cove shares to be allotted at the time of closing.
It is expected that this transaction will close in Q3 2010 pending receipt of normal partner, and government consents ("Closing"). In this respect Anadarko has already given its preliminary approval.
The new ordinary shares in Cove allotted as part of the Consideration will be priced at an average of the Cove share price for the 5 business days prior to Closing and will rank pari-passu with existing ordinary shares. DEPCO have agreed to a lock-up on such shares for six months from their date of admission to trading on AIM.
The Company is pleased to announce that drilling and associated operational activities continue on the Ironclad well and the Company will make a further announcement as and when appropriate.
John Craven, Chief Executive of Cove, said, "We are delighted to have secured this farm-in. These Blocks effectively cover from north to south most of the Kenyan deepwater acreage where we have identified on seismic data geological features that are similar to what we see in our existing interests in Mozambique and Tanzania.
"Aligning with Anadarko ensures operational and exploration continuity in our core area of East Africa with offshore Kenya as a natural follow on to our active exploration program in Mozambique where operations on the Ironclad well are continuing."