Eco (Atlantic) Oil & Gas Ltd. (CVE:EOG), an oil and gas exploration company focused on Namibia, has executed a farm-out agreement with Tullow Kudu Ltd., a wholly owned subsidiary of Tullow Oil plc.
Tullow has agreed to acquire up to a 40 percent interest in Block 2012A, situated in the Walvis Basin, offshore Namibia, Toronto-based Eco said in a statement today.
This farm-out, in conjunction with Eco Atlantic’s prior farm-out to Azimuth for 20 percent, nets the company a 100 percent carry of all costs on an expanded 1,000 km2 3D seismic survey and interpretation. The seismic program is expected to start the fourth quarter.
Dependent on the establishment of a target from the seismic program, Tullow has also committed to a full carry of cost to drill an exploration well on the Block.
Under the deal, Eco will initially transfer a 25 percent working interest in the Cooper Block to Tullow in return for a carry of the company’s share of costs to execute and process the seismic program, and the reimbursement of 25 percent of the company’s past costs in an amount to Eco Atlantic of approximately $1 million.
Following the first transfer, if Tullow elects to participate in the drilling of an exploration well on the Cooper Block, Tullow will be transferred an additional 15 percent working interest in the block, in return for a full carry of the company’s share of costs to drill an exploration well on the Block (capped at $53 million) and the reimbursement of an additional 15 percent of the past costs.
Eco Atlantic will remain operator until the second transfer, at which time, Tullow will be appointed as operator of the Cooper Block.
The deal still requires the approval of Namibia’s Ministry of Mines and Energy and various approvals of the other Block participants.
Eco Atlantic currently holds a 70 percent working interest in the Cooper Block, AziNam Limited holds a 20 percent working interest, and NAMCOR, the Namibian national oil company, holds a 10 percent working interest.
Following the first transfer, Eco will hold a 45 percent working interest in the Cooper Block, Tullow will hold a 25 percent working interest, and AziNam and NAMCOR will retain their respective working interests.
“This provides the requisite financing to progress activities on the Cooper Block, and further validates our exploration work and findings to date,” Eco Chief Executive Officer Gil Holzman said in the statement.
Shares of Eco gained 4.4 percent to 24 Canadian cents at 1:50 p.m. in Toronto, paring this year’s slump to 20 percent.
Source: Proactive Investors