Shares in Amerisur Resources PLC (LON:AMER) soared in early trading Friday after it inked a US$93mln farm-out agreement for four exploration blocks in the Putumayo basin, Colombia.
The oil & gas explorer said the deal would involve Occidental Andina, an affiliate of multinational US oil & gas firm Occidental Petroleum Corp (NYSE:OXY), purchasing a 50% interest in each of the blocks, and in return funding a US$93.25mln exploration and appraisal program between 2019 and 2021.
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Occidental would fund 85% of the total planned 2D seismic cost expenditure of US$65mln and 100% of the US$38mln planned drilling program.
In total, the work programme will include 878km of 2D seismic and the drilling of five exploration wells.
Amerisur added that its subsidiary would operate the farm-out blocks, which extend over 1.4mln acres and have prospective resources of 656mln barrels of oil.
The companies will now work towards gaining approval for the deal from the Agencia Nacional de Hidrocarburos, the Colombian oil & gas resources agency.
Giles Clarke, chairman of Amerisur, said that the deal “accelerates our upcoming work programme while significantly reducing our future capex requirements”, adding that it was “a strong endorsement of the attractiveness of our acreage position in the Putumayo basin and Colombia”.
In a note to clients, City broker Shore Capital said the deal provided “a material valuation read-across, along with important validation from a strong industry partner with extensive regional expertise” in relation to Amerisur’s prevailing market cap.
Analysts added that the firm’s capex exposure would also be “much reduced” and they maintained “a high level of confidence” in the operator.
Shares were up 20% at 12p.