Eco (Atlantic) Oil & Gas Ltd (AIM:ECO, TSX-V:EOG) has 75% of a highly prospective 1,800 square kilometre exploration block immediately adjacent to the Stabroek field, which was one of two primary assets in this week’s Big Oil deal.
So-called ‘near-ology’ has always been a factor in the investment proposition at Eco, ever since Exxon Mobil (NYSE:XOM) put Guyana on the map for oil explorers with a prolific string of discoveries which today amount to some 11 billion barrels of crude oil reserves.
Earlier this week, Chevron (NYSE:CVX) struck a deal to buy Exxon's partner in the project, Hess Corp (NYSE:HES), for $53 billion, marking the second big deal in the sector this month – following Exxon’s $60 billion acquisition of US shale firm Pioneer.
Chevron, the newest entrant offshore Guyana, described the Stabroek opportunity as “an extraordinary asset with leading cash margins and low carbon intensity that is expected to deliver production growth into the next decade.”
Eco seeks a deal too
Today, Eco holds 75% of Orinduik which is immediately adjacent to the Exxon and Hess/Chevron project. The small-cap firm upped its stake in August, taking up project equity from Tullow Oil which exited.
The AIM-quoted explorer continues to believe that exciting potential exists on both sides of the licence boundary. And, in late August, it launched a fresh farm-out process which seeks to bring in a new exploration partner to advance operations into a new phase of well drilling.
“The purchase of Hess by Chevron is a ringing endorsement of Guyana and the country’s rapidly developing energy industry,” chief executive Gil Holzman told Proactive.
“Having two of the largest energy companies in the world in Exxon Mobil and Chevron operating the Stabroek field, directly adjacent to the Orinduik Block, reaffirms our view that significant untapped potential remains in the area.
“Following our purchase of Tullow Oil’s 60% interest in Orinduik, bringing Eco’s total stake in the licence to 75%, we are working to expedite the drilling of an exploration well targeting light oil in a stacked play opportunity as soon as practically possible under the license terms and JV decisions,” he added.
Guyana is one of two major high-impact exploration opportunities being pursued by Eco.
Optionality and potential
The other is in the Orange basin, offshore South Africa. Here, Eco is also one player in a regional exploration story.
It holds a 20% stake in Block 3B/4B alongside partner Africa Oil, and a further farm-out deal could see a third party brought into the project before drilling.
An initial plan is being advanced to drill one ‘firm’ well, one contingent well and potentially as many as five wells in the licence.
Sooner, however, attention will again be on one of Eco’s neighbours – in this case, its TotalEnergies which in 2024 is slated to drill within the adjacent deep-water exploration block.
Eco partially monetised its stake in the South Africa venture, selling 6.25% to existing partner Africa Oil for US$10.5 million (with the bulk of proceeds tied to contingent project milestones).
Some of the proceeds are expected to support Eco’s diversification efforts and allow it to pursue new opportunities.
The third, focal point for Eco and its investors presntly is Namibia which as Holzman highlighted, in August, “continues to produce globally significant hydrocarbon discoveries”.
Optionality and potential have never been in short supply at Eco Atlantic.
Investors in the small-cap explorer will now be hoping that the apparent reignition of ‘Big Oil’ deal-making will translate into an uptick in action across the sector’s entire food chain.
Fresh deal-making at project farm-out level, and, a confirmation of tangible well-scheduling would be transformative for Eco’s investment story, so followers of the stock and new investors will be keen to see further signs of life in the coming weeks and months.