THREE DIRECTORS of Cove Energy are backing a new venture to explore for oil off the Irish coast.

John Craven, the chief executive of Cove, Michael Nolan, the Cove finance director and non-executive director Stephen Staley are all shareholders in Terra Energy, which will be backed into a shell company listed on the Alternative Investment Market in London. The deal is expected to be announced today. Mr Staley will be chief executive of the new company, to be renamed Fastnet Oil and Gas, which will focus on off-shore Ireland and Africa.

Terra Energy has three licence application options pending in the Celtic Sea and is looking at other opportunities. The company was established in 2008 by Michael Nolan to exploit alternative energy sources such as shale gas, but it refocused on exploration in 2010 when Dublin-based Raglan Capital invested. Raglan will be the largest shareholder in the new group with a 12 per cent stake. Cathal Friel of Raglan will be the non-executive chairman.

Cove, which was floated three years ago, is currently the subject of a takeover bid from Shell, the multinational oil company, which has tabled a £1.1 billion offer for the group. Mr Craven and the other Cove directors will be significant beneficiaries of the deal.

The three Cove directors will have around 5 per cent of Fastnet each, but only Mr Nolan and Mr Staley will join the board. Mr Craven will be a member of the advisory board along with Paul Griffiths, the founder of Island Oil Gas. The all-share deal values Terra at about £7.5 million and another £10 million has been raised from new investors.

The placing of 90 million new shares at 11p per share with institutional and private investors was done by Shore Capital and Davy.

The money will be used to acquire existing early stage exploration and production opportunities in the Celtic sea and also Northern and east Africa. The company will also look to identify new opportunities.

Terra is being backed into a shell company called Sterling Green which is chaired by businessman Michael Edelson. Mr Edelson, who is also a director of Manchester United Football Club, will join the board of Fastnet.

The takeover will have been approved by Sterling Green shareholders.