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Eco Atlantic Oil & Gas “absolutely delighted” as Total triggers Guyana farm-out four months ahead of schedule

The payment from Total is expected to fund Eco's participation offshore Guyana for a number of years, including well costs once exploration drilling gets underway
oil and gas operations
Exploration of the Orinduik block will now be led by Tullow Oil (60%), Total (25%) and Eco (retaining 15%)

Eco Atlantic Oil & Gas Ltd (LON:ECO) (CVE: EOG) rose on Thursday as the explorer announced that French oil giant Total SA has now exercised its option to acquire a 25% stake in the Orinduik Block, offshore Guyana.

Total joins the exploration venture alongside operator Tullow Oil plc (LON:TLW), owning 60%, and Eco which will retain a 15% interest.

Perhaps notably, Total decided to take-up its stake in Orinduik earlier than expected, before it received the final seismic report (under the original timeline the report’s delivery would’ve triggered a 120-day deadline for a decision).

WATCH: Boost for Eco Atlantic Oil & Gas as Total moves ahead with Guyana farm-out

"We are absolutely delighted that Total, one of the world's largest oil companies, has so quickly chosen to exercise its option to acquire a 25% stake in our Orinduik block to gain further exposure to offshore Guyana, currently one of the most exciting exploration areas globally,” said Gil Holzman, Eco chief executive.

“The board believes the early exercise of the option by Total is an indication of Total's confidence in the prospectivity of the Orinduik Block based on the data it has received to date from Eco and Tullow Oil, the existing licence partners on the Orinduik block.”

Holzman added: "The entrance of Total into the Orinduik Block provides further endorsement of the prospectivity of this License.

“With Tullow as Operator and the technical contribution that both Total and Eco now bring to the project, we look forward to working with these two world-class players in further progressing the exciting exploration of the Orinduik block.”

READ: Deep dive: Eco Atlantic Oil & Gas’s attractive position offshore Guyana

The option exercise means that Eco will now receive a US$12.5mln payment from Total, which is expected to be sufficient to cover the AIM-quoted explorer’s share of the costs for a least two wells at Orinduik Block – potentially starting next year.

Also, it effectively recovers funds previously committed to pay for the 3D seismic programme.

"The exercising of this Option strengthens our already very strong financial position. It will fully fund us for the next few years, which are expected to include several exploration and drill programs,” Holzman said.

Earlier this week, Eco revealed a third-party assessment of the Orinduik block, detailing nearly 3bn barrels of potential resources across a number of pre-drill prospects and leads.

Recent, nearby successes in ExxonMobil’s adjacent exploration block would also be a likely factor in the growing interest and confidence around Orinduik’s potential – Exxon’s Hammerhead discovery, the US major’s ninth offshore Guyana, is the closest yet to Eco’s acreage and, indeed, it is visible in the seismic data package.

Colin Kinley, Eco chief operating officer, said: "After our issuance of the initial resource report on Orinduik, which identified our initial exploration leads with close to three billion barrels of recoverable oil only a few days ago, Total's response helps to validate a couple years' worth of science and interpretation.

“Total entering the blocks four months earlier than anticipated is welcomed, as they add significant technical horsepower to the interpretation and now bring them into the planning for drilling. Tullow announced last week drilling is anticipated early Q3 2019."

In early afternoon trading, Eco (Atlantic) shares were 3.4% higher at 52.75p.

 -- Adds share price --

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