Cove energy clarifies tax position

London - The British-based oil and gas exploration company Cove Energy on Tuesday issued a statement clarifying details of tax charges affecting the sale of its Mozambique assets.

Cove holds an 8.5 per cent share in the Rovuma Offshore 1 exploration area, where the operator, the US company Anadarko Petroleum has so far discovered what is estimated to be between 17 and 30 million cubic feet of natural gas. Cove also has a ten per cent stake in the Rovuma Onshore block.

Several large companies are interested in taking over Cove Energy and its stake in Mozambique, including Royal Dutch Shell, the Thai state oil company PTT and the Indian state firm ONGC. These are not hostile takeover bids – indeed, in January Cove announced that it was putting itself up for sale.

At the beginning of March, the Mozambican government announced that it was no longer prepared to tolerate the sale of Mozambican assets abroad without the country receiving any benefit, and stated that it was prepared to impose a capital gains tax on any sale.

This led to an alarmed reaction from Cove which said it would “seek clarity” from the Mozambican government. With the takeover bid suddenly looking uncertain, Cove’s share price on the London stock exchange tumbled.

Now Cove has received the clarification it wanted, and has clearly decided not to oppose the tax.

According to the Cove statement, “following discussions with various representative bodies of the Government, Cove has received written clarification in relation to the basis for, and method of calculation of, the proposed tax charge”.

The company announced that it will be subject to corporate income tax on the imputed capital gain arising from its Mozambique assets as a result of the sale, at a rate of 12.8 per cent.

Shell had put in a bid to buy Cove for 1.6 billion US dollars, which was topped by PTT, who offered 1.8 billion dollars.

The bidding process will now resume, and Cove’s share price rose by 3.69 per cent on Tuesday morning.

Post published in: Africa News

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