FoxDavies Daily Monitor - Cove Energy, African Petroleum and AMEC

Cove Energy (COV LN, 158.8p, ▲ 2.0%) Eighth Success Offshore Mozambique. Cover Energy, alongside operator Anadarko, today provided an operational update on the Lagosta-3 appraisal well, located about 3km west of the Lagosta-1 discovery well in the Rovuma Basin Area 1 block, offshore Mozambique. The Lagosta-3 well, which is the eighth successful well to be drilled in the world class WLBC gas complex, is also 15km south of the Camarao-1 well in the same Basin. Highlights included: the well encountering a natural gas column of 577 net feet; the gas column comprising of high quality gas sands not well imaged by seismic data thus confirming the gas accumulation to the western limits of the Windjammer, Lagosta, Barquentine and Camarao gas (WLBC) gas complex, into what was an unknown area; and pressure readings confirming vital reservoir continuity of Lagosta-3 to Lagosta-1 and 2 and to the Windjammer/Camarao wells. These results continue to support the Company's recoverable resource estimates of 15 to 30-plus TCF of natural gas in the discovery area as well as providing additional information that will be incorporated into theirs and Anadarko's models to help determine the optimal subsea development plans for the whole complex. Expect some strong movements today.

African Petroleum (AOQ AU, A$1.20, ▲ 70%) Oil Strike. The Company has made what it hopes to be a commercially viable deep-water oil discovery off Liberia with its Narina-1 well. The well in its 100% owned Block LB-09 hit a total of 32 metres of net oil pay in two zones, with a large accumulation of good quality oil found in each of the Albian and Turonian reservoirs. The well was drilled with the Maersk Deliverer rig in a water depth of 1,143 metres, taking 43 days to complete. Going forward, the Company is sourcing rigs and planning an extensive exploration and appraisal programme in Liberia during the course of this year. With this being African Petroleum's second consecutive deep-water well off Liberia, the Company will be hoping that unlike the first probe, Apalis-1, which was a non-commercial discovery, that the Narina-1 well will meet expectations.

Oilfield Services News

AMEC (HOLD) (AMEC LN, 1108, ▲ 1.1%): AMEC's 2011 results were solid. Underlying revenue increased by 3%, driven by a strong performance within the oil and gas and minerals and metals markets, offset by a decline in oil sands and US federal activities. Reported EBITA increased 12% to £299M (2010- £269M) with margins broadly in line at 9.2%. Underlying EBITA increased by 6 per cent. Adjusted profit before tax was £311M, ahead of the previous year (2010: £280M) driven by volume growth and acquisitions. The final dividend of 20.3p, which together with the interim dividend of 10.2p results in a total dividend of 30.5 pence per share (2010: 26.5 pence), represents a 15% increase. The Group has decided to commence a share buyback programme of £400M, which is expected to be completed over the next 12 months.

The outlook statement was positive with the company stating: 'AMEC is on track to deliver double-digit underlying revenue growth in 2012, despite the continued macro-economic uncertainty. The strength of the order intake during 2011, the continued demand for AMEC's services and the on-going customer investment in AMEC's core markets are driving growth expectations. However, overall margins are expected to reduce somewhat, impacted by a shift in business mix and an increase in procurement activities for strategic customers. Management remains focused on the Vision 2015 strategy and now expects to achieve earnings per share of greater than 100p ahead of 2015.'