Eco (Atlantic) Oil & Gas Ltd has signed a binding “framework agreement” to bring in Navitas Petroleum LP as a partner in Guyana’s Orinduik and South Africa’s Block 1 CBK, both offshore exploration blocks, and potentially expand the partnership across Eco’s current and future assets.
The companies agreed to enter into a deal for Navitas, an Israeli oil and gas exploration and production company mainly operating in the United States, to buy an 80 percent operating stake in Orinduik for $2.5 million, Eco said in an online statement. Eco, a Canadian oil and gas explorer focused on the Atlantic Margin, will retain 20 percent.
Orinduik, in the proven Suriname-Guyana basin, has yielded two discoveries to date, Jethro-1 and Joe-1 in 2019, Eco says on its website. The license area sits 11 kilometers (6.84 miles) up-dip the Liza discovery and six kilometers up-dip the Hammerhead discovery in the Exxon Mobil Corp-operated Stabroek block, according to Eco.
Orinduik spans 1,354 square kilometers (522.78 square miles). It sits 170 kilometers from shore, according to Eco.
“Eco’s remaining 20 percent working interest will be carried in respect of the work to be performed in the Orinduik Block, which may include drilling the first exploration well or performing an appraisal program over the existing Jethro-1 and Joe-1 heavy oil discoveries”, the statement said.
“The Orinduik carry is capped at $11 million net to Eco and excludes mobilization costs, if any”.
In South Africa Navitas will obtain a maximum 47.5 percent operating interest in Block 1 CBK for $4 million.
Eco said it has concurrently entered into an “option agreement” with OrangeBasin Energies Pty Ltd, formerly Tosaco Energy Pty Ltd, to purchase 20 percent from the current partner. This would raise Eco’s ownership to 95 percent before Navitas’ acquisition.
“Under the option agreement, if exercised in full by Eco, OrangeBasin Energies will receive $500,000 on exercise and $500,000 on completion and $3,800,000 on completion which Eco will have the right to settle in cash or common shares at the company’s [Eco’s] sole discretion”, Eco said.
“On completion, OrangeBasin Energies’ remaining five percent retained interest will be carried by Eco and Navitas for the exploration right period including drilling up to two contingent exploration wells”, Eco said.
Block 1 CBK covers 19,929 sq km on South Africa’s side of the Orange Basin, according to Eco.
“Eco’s remaining working interest, amounting up to 47.5 percent assuming the exercise of the option with OrangeBasin Energies… will be carried for the work program, the value of the carry being capped at $7.5 million net to Eco”, Eco said.
The farm-ins would be subject to customary regulatory approvals, Eco said.
It added, “Navitas will also have the option, subject to agreement on commercial terms at the time of exercise, to potentially acquire at least 25 percent of Eco’s working interests, as they will be at the time of such election, and excluding Eco’s Guyana assets and Block 1 CBK, and, to the extent possible, assume operatorship in the rest of the petroleum assets held by Eco”.
“Assuming no change in Eco’s asset portfolio beyond the exercise of the Orinduik Option and Block 1 CBK Option, these assets include Offshore Namibia PEL97, PEL99 and PEL100 and at least a 25 percent interest in [Eco subsidiary] Azinam Ltd which holds Block 3B/4B offshore South Africa”, Eco said.
“Option proceeds will support direct license work programs across the portfolio and help identify and assess new oil and gas exploration assets and opportunities.
“As part of the strategic partnership, Eco shall invite Navitas to join Eco on a 50:50 basis, where appropriate, on future new ventures and assets targeted and potentially acquired by Eco”.
Eco president and chief executive Gil Holzman said, “This strategic partnership with Navitas, a multi-billion-dollar company with a strong record in acquiring, financing and developing high-impact oil and gas projects, is truly transformational for Eco Atlantic”.
“Following a joint visit by our teams to Guyana later this month, we expect to gain clarity on our work program and appraisal plan for Orinduik”, Holzman added.
“We believe this partnership paves the way for our planned exploration and appraisal programs on the block towards commercialization, which will be carried and operated by Navitas, and will serve as a high-impact catalyst for the company”.