Eco (Atlantic) Oil & Gas Ltd (TSX-V:EOG, AIM:ECO) shares traded up, gaining 12% to 61.55p in London, after it struck a farm-out deal with BP over its offshore Namibian portfolio, bringing in a supermajor as operator while sharply cutting its own funding exposure across three exploration licences.
Under the agreement, BP Namibia Energy will acquire a 60% participating interest in PEL97, PEL99 and PEL100, pay US$2.7 million in cash on completion and assume operatorship.
Eco will retain 25% in each licence, with the transaction still subject to approvals from the Namibian authorities and TSX Venture Exchange acceptance.
The deal also gives Eco a full carry through the current exploration phase on its retained 25% stake, including its share of the carried interests held by NAMCOR and local partners. The proposed work programme includes seismic reprocessing on PEL97 and at least 3,000 square kilometres of 3D seismic over PEL99 and PEL100.
A further option could deepen BP’s role from 2028 if the partners enter the second renewal period and commit to drilling. At that point, Eco can either transfer another 10% in each licence to BP in exchange for a full carry on its remaining 15% stake.
This is capped at US$21 million net to Eco per well on each block, or keep its 25% interest and fund its share of drilling costs. Across all three licences, the maximum aggregate carry under those put options would be US$63 million.
Chief executive Gil Holzman said the transaction showed Eco’s strategy of partnering with majors to “derisk” the portfolio while preserving upside.
"This successful farm down of our Namibian Walvis Basin Licenses marks an incredible moment for Namibia, for Eco Atlantic and its shareholders," Holzman said.
"This transaction is a clear demonstration of our strategy partnering with Supermajors and IOC's, to derisk our portfolio while retaining material exposure to significant upside potential with very limited financial requirements from Eco.
Eco, meanwhile, noted that the deal proceeds will support exploration and appraisal work across its wider Atlantic Margin portfolio.