Eco (Atlantic) Oil & Gas
Thanks to Malcy's blog
March 7, 2024
Eco (Atlantic) has announced it has signed a Farmout Agreement pursuant to which Azinam Limited, its wholly owned subsidiary, will farm out a 13.75% Participating Interest in Block 3B/4B, offshore the Republic of South Africa as part of an aggregate 57% farm down transaction along with its Joint Venture Partners Africa Oil SA Corp. and Ricocure (Proprietary) Limited to TotalEnergies EP South Africa B.V., who will become Operator and QatarEnergy International E&P LLC.
Upon completion of the Transaction, Eco will retain a 6.25% interest in Block 3B/4B.
Transactions Highlights:
Maximum transaction value, including carry, of up to US$32.1m to Eco, which includes payments due to Eco from Africa Oil and Ricocure under previously announced agreements as detailed below:
· As a result of the 6.25% farm out transaction with Africa Oil, announced on 11 July 2023, Eco will receive up to US$5.5m in two payments, US$4m on Completion of the Transaction, as defined below, and a further US$1.5m on spudding of the first exploration well, and US$1.2m due from Ricocure pursuant to the original Azinam – Ricocure 2019 farm out agreement due on Completion.
· TotalEnergies and QatarEnergy transaction will deliver, subject to achieving certain milestones, staged cash payments, comprising a total cash payment of US$11.92m of which US$1.92m is payable at Completion and the remaining balance in two equal successive payments, conditional upon receipt of customary regulatory approvals and the balance on spudding of a first exploration well.
· Eco will also receive a full carry of its 6.25% retained share of all JV costs, up to a cap, repayable to TotalEnergies and QatarEnergy from production, which is expected to be adequate to fund the Company’s share of drilling for up to two wells on the licence.
Gil Holzman, Co-founder and Chief Executive Officer of Eco Atlantic, commented:
“We are delighted to have signed this agreement with TotalEnergies and QatarEnergy. Block 3B/4B sits in one of the most prolific and exciting areas in the world for offshore oil and gas exploration and development. The decision by two of the largest energy companies globally to farm into this licence is strengthened by their significant understanding of the Orange basin, having made the Venus large light oil discovery just recently north of the basin in Namibia.
“I would like to thank our partners at Africa Oil and Ricocure for their cooperation and jointly negotiating this farm out agreement. We now look forward to working closely with the government of South Africa and our new partners on the exploration licence to prepare first drilling.”
This too is a very good deal, a strategic fit if ever there was one which leaves Eco in a very strong position in South Africa with Total and Qatar as partners. Indeed as partners Total fit the bill down to a T, they have immense knowledge of the petroleum system, are involved in blocks 5,6 and 7 as well as deep water blocks and now have two rigs of its own in the area one of which is earmarked for the Orange Basin.
This is the biggest deal Eco has done, a great deal of money brought in in a number of payments including the spud of an exploration well and more importantly a full carry of all its JV costs repayable from production. But this is a smart deal in more than one way than one, with its 6.25% Eco will be in a very strong position in one of the best post codes in international oil exploration.
The 4 billion barrels in the CPR mean that even 6.25% of that really ‘moves the needle’ in any valuation of Eco, they are kushti in that after any discovery and payback they have the put and the call. My guess is that Qatar would buy more of the block so would be a natural buyer at a premium or Eco could just hunker down and watch the value rise.
Once this has been done Eco have the small matter of their acreage in Namibia to farm-out and with the interest locally interest may be substantial. Finally the company are doing a formal farm-out process with regard to their Orinduik block in Guyana where current interest is also very keen.
Eco shares are up very modestly today, it will take a while for the market to work out quite how valuable they are after this deal and I’m sure that will come with time, they stay in the bucket list out next week.
