Eco (Atlantic) Oil & Gas Ltd (LON:ECO, CVE:EOG) has inked a deal with French major Total which acquires the option to take a 25% stake in the group’s Orinduik Block, offshore Guyana.
The AIM-quoted explorer is already partnered with Tullow Oil (LON:TLW) in the block, where a new 3D seismic programme was completed earlier this month.
Orinduik is located in the vicinity of Exxon’s Stabroek Block where large new discoveries are estimated to host between 2.25bn and 2.75bn barrels of crude.
"We are extremely happy to complete this agreement with Total SA, one of the world's largest oil companies,” said Gil Holzman, Eco chief executive.
“The deal not only validates the quality of the Orinduik block as a highly prospective license, it also validates Eco's long term strategy - to identify highly prospective assets in frontier basins, with favourable Petroleum Agreement terms, and with world class partners.”
If the option is exercised, Total will pay Eco US$1mln up front, and can acquire the 25% stake for an additional payment of US$12.5mln
Eco anticipates that the transaction will provide sufficient new funds to cover its share of costs for up to two wells, based on the current estimates of drilling costs (with one well seen to cost around US$35mln, or US$5.25mln net to Eco).
Holzman highlighted: “The deal proceeds will recoup all our expenses on the expanded 3D program and fund us for drilling a minimum of two wells based on current well costs.
“We have approximately US$4 million in cash currently and once the Option is exercised Eco will be in a very strong position to be fully funded through the next few years which is expected to include several drill programs.
“This deal is also expected to introduce into Guyana yet another significant global player and we look forward to working with Total as well as Tullow in the years to come."
The option is exercisable up to 30 days following the completion of the new 3D seismic data being processed and interpreted – it is expected to take 2-3 months from the end of the programme (September 5).
Eco will retain 15% of Orinduik alongside Tullow with 60% and Total with 25%.