Cove said on Thursday, Jan. 5, that it had tapped Standard Chartered Bank plc to prospect for a buyer after coming to the realization that its plans to sell its 8.5% stake in the Mozambique Offshore Area 1 block, known as the Rovuma Area 1 Interest, was effectively the same thing as selling the entire company.

"Rovuma Area 1 Interest represents a substantial portion of Cove's asset value," the company said in a statement. "As such the directors have unanimously agreed that a sale of the company may be appropriate at this time."

Analysts predicted that Cove will attract attention from large oil and gas producers, including China's state-owned energy companies, drawn by Cove's minority stake in Rovuma as well as a number of other promising if speculative West African gas blocks. In addition to its interest in Rovuma Area 1, Cove also owns a 10% stake in a Mozambique onshore gas block, minority holdings in two exploration blocks in Tanzania and small stakes in seven Kenyan blocks.

Competition for the asset coupled with the company's recent share price means that bidders are unlikely to get a bargain, warned analysts at Tudor Pickering Holt & Co. Securities Inc. They noted that Cove's shares had climbed 30% since it launched the sale of the Rovuma Area 1 stake in December. "At a 20% premium to our NAV [net asset value], it feels fully valued," they said.

Cove's hopes of attracting a wide range of bidders has been boosted by an agreement from Britain's Takeover Panel to waive some usual bid conditions, including the requirement for suitors to make their interest public and to formalize an offer within 28 days of entering the bid process.

Cove's estimates that its share of the gas in Rovuma Area 1 is probably worth about $1 billion on a net present value basis, but could be worth as much $1.6 billion depending on the rate of extraction. Cove had about £100 million of cash and no debt, according to a presentation made in December.

The sale of the entire company will run parallel to continued efforts to sell the Rovuma Area 1 holding, the company said. The LNG project, which is expected to begin production in 2018, is operated by Anadarko Petroleum Corp. of Woodlands, Texas.

Cove's largest investor is Blackrock Inc., which held 10.22% of the company in mid-October 2011, according to information on the company's website. Other significant shareholders include JP Morgan Asset Management (UK) Ltd., with 9.99%, F&C Asset Management plc, 7.34% and Standard Life Investments Ltd. and Prudential plc, both of which held almost 6%.

A sale would deliver a significant boost to the bank accounts of Cove's senior executives. Executive Chairman Michael Blaha, a former Shell executive, and CEO John Craven, formerly a CEO at Petroceltic International plc, own 450,000 shares and 2.8 million shares respectively. The two also have options on a further 7.7 million shares each. The bulk of those options, covering 6.5 million shares apiece, have an exercise price of 20 pence. Cove's finance director Michael Nolan owns 1.36 million shares and has options on about 2.8 million shares, 1.8 million of which have a strike price of 5 pence.

Cove shares traded Thursday at 123.25 pence, up 10.75 pence or almost 10%

The auction will be led by a Standard Chartered Bank team including Amer Baig, Geraldine Murphy, Hein Pieter Boers and Aditya Yadav. Cove is also taking financial advice from Cenkos Securities plc's Jon Fitzpatrick and Ken Fleming. It did not identify legal advisers but its UK solicitors are Lawrence Graham LLP.