City brokers have welcomed the news of Eco Atlantic Oil & Gas Plc’s (LON:ECO) new significant shareholder, Africa Oil Corp.
Eco’s AIM quoted shares shot up around 12% on Monday after the premium priced share subscription was announced.
It has raised £8.46mln of new capital through the share sale, issuing AOC a 19.77% stake (29.2mln shares at a price of 29p each).
Cash raised in the funding will be earmarked for Eco’s exploration ventures, allowing the company to actively identify, negotiate and contract new oil and gas exploration assets and conduct the initial work programmes.
At the same time, Eco and AOC are entering a strategic alliance agreement to jointly bid on new assets and ventures. Also, AOC chief executive Keith Hill will join the Eco board as a non-executive director.
Analysts at stockbroker Panmure Gordon described it as a “very positive transaction”, and added that the deal highlighted the quality of Eco’s technical expertise and ability to negotiate and execute transactions.
“The significant premium will be well-received by the market and we look forward to seeing what new asset management will add to the portfolio going forward,” Panmure added.
William Arnstein, analyst at Brandon Hill Capital, in a note, said: “The capital raise and strategic alliance agreement is clearly a positive development for Eco providing a strong validation of the quality and value of its existing portfolio, as well as an endorsement of management’s ability to secure other prospective opportunities.”
The analyst added: “We believe Africa Oil is a like-minded frontier explorer with a strong track record having participated in a number of material oil discoveries in Kenya. Following a partial disposal of these assets to Maersk Oil, Africa Oil has significant cash resources and we believe will be an important strategic partner for Eco going forward.”
New partner with “significant financial muscle”
In a statement Eco chief executive, Gil Holzman, described Africa Oil Corp as “a like-minded company with a similar philosophy” highlighting that the new shareholder and potential partner is focussed frontier regions and has “significant financial muscle” to deliver on its strategy.
“Eco is now in an incredibly strong financial position,” Holzman said.
“We are funded for our forthcoming work programmes in both Guyana and Namibia through a series of agreements with Tullow Oil, AziNam, and Total and through these new agreements with AOC; we now also have the capability, as well as an industry leading partner, to identify further assets and to accelerate the work programmes on them.
“AOC is also, through its shareholding, now intrinsically aligned with Eco to deliver this strategy."
He added: “This is a very exciting and busy time for Eco and we look forward to working with the AOC team to identify new projects to add to our portfolio whilst progressing our current assets in Guyana and Namibia together with our existing industry leading partners.”