Royal Dutch Shell Plc, Europe’s largest oil company, offered to buy African explorer Cove Energy Plc for 992.4 million pounds ($1.6 billion) to gain a foothold in Mozambique.

Shell is offering 195 pence for each Cove share, a 26 percent premium to the closing price of the London-based company yesterday, according to a statement. Cove’s board separately said it expected to recommend the proposed acquisition.

Cove put itself up for sale last month after reporting one of the world’s largest gas discoveries in a decade off Mozambique. Cove has an 8.5 percent stake in Rovuma Area 1, which holds 15 trillion to 30 trillion cubic feet of recoverable gas, enough to justify production of liquefied natural gas for Asian markets. The find is operated by Anadarko Petroleum Corp.

“This is a much better price than the market anticipated and will likely not see” another bidder, said Stuart Joyner, an analyst at Investec Securities in London.

Cove jumped 39.5 pence, or 26 percent, to a record 194 pence in London. Other oil and gas companies active in Africa also advanced, with Ophir Energy Plc climbing 7.3 percent and Afren Plc gaining 5.9 percent.

‘Assessing Opportunities’

Shell is “assessing opportunities” to expand further in Mozambique, according to Jonathan French, a London-based spokesman.

Anadarko and Eni SpA are leading two different groups of investors, which between them have found about 70 trillion cubic feet of gas off Mozambique. Both operators have said they are ready to sell stakes to share costs and reduce risks.

“The involvement in gas for potential LNG fits into Shell’s dominant LNG portfolio,” said Peter Hutton, an analyst at RBC Capital Markets in London.

The premium on the proposed takeover compares with the 22 percent average premium paid in oil and gas deals last year, according to data compiled by Bloomberg.

Based on mean recoverable resource estimates, the deal would value Cove at $4.1 per barrel of oil equivalent, according to analysts at Sanford C. Bernstein & Co.

Boost Spending

Cove has already been working with Total SA and BG Group Plc to explore off the coast of Kenya. Last year, it joined Cairn Energy Plc to bid for exploration licenses off Lebanon.

Shell, which joined forces with Petroleo Brasileiro SA of Brazil last year to search for oil and gas off Tanzania, has been unsuccessful so far in East Africa. It plans to increase spending on exploration 35 percent to about $5 billion this year.

In 2002, Shell bid for four exploration blocks off the islands of Zanzibar and Pemba, part of the semi-autonomous nation on an archipelago in the Indian Ocean which has a political union with Tanzania. The oil company has been in talks with both to finalize the licenses.

Cove has received “a lot of serious interest” from national and international oil companies, John Martin, a managing director at Standard Chartered Bank, which is advising Cove on the sale, said yesterday. Morgan Stanley is acting for Shell.