Cove Energy’s (LON:COV) 8.5 percent stake in the ‘Offshore Area 1’ of the Rovuma Basin could have net reserves in the region of 170 million barrels of oil equivalent, according to research by Ambrian Capital analyst Werner Riding.
This morning Cove revealed that its joint venture partner Anadarko Petroleum (NYSE:APC) has made a fourth gas discovery in the Rovuma Basin, offshore Mozambique.
The latest discovery well, Tubarão, was drilled to 4,237 meters in deep water (898 meters), about 29 kilometres from the Mozambique coastline. Tubarão encountered more than 110 feet of natural gas pay in a high-quality Eocene-age reservoir. The reservoir is separate and distinct from the other hydrocarbon accumulations found in Anadarko's three previous discoveries in the same part of the basin.
“Tubarão demonstrated an almost identical seismic response at reservoir depth as in the previous discoveries at Windjammer, Barquentine and Lagosta and so a fourth consecutive major gas discovery was likely,” Riding said.
“Drilling activity for the rest of this year will now focus on the appraisal of the northern area gas discoveries.
“We expect this appraisal drilling to allow Cove and their operating partner to be able to reclassify their resources into reserves and at this point, we anticipate Cove will have net reserves of around 170 million barrels of oil equivalent - 8.5 percent of 12 trillion cubic feet.”
By extrapolation the analyst’s forecast would put the total ‘Offshore Area 1’reserves near the 2 billion barrel mark (oil equivalent).
He adds: “Beyond this we highlight that with further exploration drilling due to commence towards the end of 2011 this number has scope to grow significantly.”
Meanwhile Richard Griffith, oil and gas analyst at Evolution, upped his target price in response to the new discovery from 115 to 140 pence per share.
“We move our target price up to 140 pence to reflect not just the Tubarão success but de-risking of follow-up prospects and the opening up of a new play type,” Griffith said in a note to clients.
Anadarko is the operator and the largest stakeholder (36.5 percent) in the massive 2.6 million acre ‘Offshore Area 1’ licence block.
Cove Energy has a 8.5 percent stake in the acreage. While the others are Mitsui E&P (20 percent), BPRL Ventures (10 percent), Videocon (10 percent).