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UPDATE: Cove Energy shares rise on Barquentine-3 appraisal success; resource estimates upgraded

UPDATE: Cove Energy shares rise on Barquentine-3 appraisal success; resource estimates upgraded

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Shares in East African oil and gas firm Cove Energy (LON:COV) shot up 12 per cent in early deals as it revealed its latest appraisal success offshore Mozambique.

The Barquentine-3 is the sixth successful well in the Rovuma Basin Area 1 block, which contains the Windjammer, Lagosta, Barquentine and Camarão discoveries – also referred to as the WLBC complex.

As at 2.20pm, the firm's shares had dropped back but were still up 10.09 per cent, changing hands at 87.25 pence.

The latest results from the well have shown the thickest gas pay to date from the block. It encountered more than 202 net meters of natural gas pay in two high-quality Oligocene-aged fan systems, Cove said.

As a result of the Barquentine-3 appraisal success, the WLBC complex is now estimated to contain between 15 to +30 trillion cubic feet (tcf) of recoverable gas resources, with between 30 to 50+ tcf of natural gas in place.

"Barquentine-3 encountered outstanding Oligocene gas saturated reservoirs in terms of thickness and rock quality,” said chief executive John Craven.

“As a result, the partnership has significantly upgraded the recoverable gas resource range to 15 - 30+ TCF in the Oligocene and Eocene reservoirs of the discovered field area of the WLBC gas complex.

“The rest of the Area 1 block remains highly prospective and holds over 15+ identified prospects and leads that are significantly de-risked by the successful appraisal drilling campaign and which possess similar age and seismic character traps to existing discoveries. 

“There is also deeper untested potential in existing discoveries.”

Craven added: "Barquentine-3 clearly demonstrates how value can be created by appraisal drilling. 

Future plans include drilling three further appraisal wells and flow testing, both running parallel to exploration drilling, throughout this prolific block."

"This is another positive drilling result for Cove offshore Mozambique. As a result, we are increasing our resource estimate for the WLBC complex to 15.2 trillion cubic feet (tcf)," said broker Westhouse, which rates the stock a 'buy' and increased its target price to 124 pence for the shares.

"Our other estimates for Tubarao, of 2.0 tcf and additional on-block prospects/leads of 15tcf remain unchanged."

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