Africa Oil Corp (TSX:AOI) said it has entered an agreement to buy an additional 6.25% interest in Block 3B/4B in the Orange Basin off the coast of South Africa for $10.5 million in cash.
The company said it signed a legally binding Letter of Intent (LOI) with Azinam Limited, a wholly owned subsidiary of Eco (Atlantic) Oil & Gas Ltd for the additional stake.
The cash consideration of $10.5 million will be paid in tranches, starting with $2.5 million within 30 days after signing the LOI and another $2.5 million when the government approves the transfer of the stake. The company will pay $4.0 million on the completion of a farm-out deal to a third party and the final $1.5 million on spudding the first exploration well on the block.
The plan is to farm out up to a 55% gross working interest in the Block.
When the deal is completed, Africa Oil’s stake in the block will rise to 26.25% while Azinam holds a 20.00% stake and Ricocure (Proprietary) Limited holds the remaining 53.75% interest.
Africa Oil has a 15.02% stake in Eco.
The company said an independent review reported that Block 3B/4B has total unrisked gross prospective resources of approximately 4 billion barrels of oil equivalent and put the probability of success from 11% to 39% over the 24 prospects identified.
Block 3B/4B covers an area of 17,581 square kilometres within the Orange Basin off the coast of South Africa. This block lies to the southeast and on trend with number of oil discoveries including Venus and Graff.
Africa Oil is a Canadian oil and gas company with producing and development assets in deepwater Nigeria and an exploration/appraisal portfolio in west and south of Africa, as well as Guyana.
Contact the author at jon.hopkins@proactiveinvestors.com