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Eco Atlantic Oil & Gas has huge prize in its crosshairs

Snapshot

ExxonMobil has made ten discoveries on the neighbouring Stabroek Block with an estimated 5bn barrels of oil

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Quick facts: Eco Atlantic Oil & Gas Ltd

Price: 135.5 GBX

AIM:ECO
Market: AIM
Market Cap: £249.86 m
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  • Drilling to start in May or June at Jethro-Lobe prospect offshore Guyana in the Orinduik Block

  • One exploration well planned by operator Tullow with a minimum two wells expected

  • Eco Atlantic has 15% stake in Jethro-Lobe

  • ExxonMobil has made ten discoveries on the neighbouring Stabroek Block with an estimated 5bn barrels of oil

  • One discovery, Hammerhead, is just 7km from the boundary of the Orinduik licence

 

What it does

Eco Atlantic owns a 15% stake of the Orinduik licence offshore Guyana in the Atlantic Ocean.

A farm-out with French giant Total saw its stake reduced from 40% in return for a cash payment of US$12.5mln.

Away from Guyana, Eco owns four licences off the coast of Namibia including 57.5% of the Cooper Block where Tullow was the operator but decided instead to focus on Guyana. 

Eco’s exploration licence at Cooper runs for another three years with a drill ready target (The Osprey Prospect) and it is looking for another partner to help fund the programme.

 

How is it doing?

Oil commentators about very excited about the Guyana acreage, which is a mirror of the hugely productive Jubilee field off the coast of Ghana.

Drilling will be the test, but the evidence from Exxon suggests plenty of reasons for optimism.

Eco said its 15% share of the Jethro-Lobe well is expected to incur net costs of US$7.6mln.

Following the recent completion of its farm-out deal with Total, the junior explorer is sufficiently funded, with more than US$20mln in the bank at the end of November.

Namibia is less of a focus while the drilling gets underway at Jethro-Lobe, but a new partner would kick-start activity here as well.

 

What the boss says: Colin KInley, chief operating officer

“We have a great deal of confidence in the selection of the Jethro-Lobe drill candidate; the partners are unanimous on the selection of the location, reservoir quality, charge and production characteristics and view this candidate as having a high chance of success and potential for a first discovery.”

Video

 

Inflection points

Spudding of well and results from Jethro-Lobe in May/June

Details of follow up well or additional programme

New partner for Namibian assets

 

Blue Sky

Possibility that Orinduik can be as large as Stabroek and contain billions of barrels of oil

In that case, Eco Atlantic would become a very large company very quickly

Namibia assets prove commercial and add to the pipeline

 

What the broker says : Berenberg

Berenberg describes AIM-quoted Eco (LON:ECO) as ‘the only pure-play on one of world’s the most attractive exploration hotspots."

With a price target pitched at 110p, Berenberg suggests some 140% upside to the Eco share price.

“Partnered with Tullow Oil and Total, Eco will embark on a potentially transformational exploration programme starting in Q2 2019, launching a multi-well campaign on the Orinduik block, next to Exxon’s Stabroek block,” Berenberg analyst Ilkin Karimli said in a note.

“The Exxon-led consortium has made 10 discoveries in the neighbouring Stabroek block, with total recoverable resources of more than 5bn bbl.

“These discoveries, currently in development, may deliver upwards of 750kbpd of production by 2025, making Guyana one of the largest oil-producing nations in the world."

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