Total Signs Option Agreement with Eco Atlantic on the Orinduik Block, offshore Guyana
Tuesday 26 September 2017
Eco (Atlantic) Oil & Gas Ltd. (AIM: ECO, TSX-V:EOG), is pleased to announce that its subsidiary, Eco Atlantic (Guyana) Inc. (“Eco Guyana”), has entered into an option agreement on its Orinduik Block, offshore Guyana, with Total E&P Activités Pétrolières, a wholly owned subsidiary of Total SA (together “Total” and, the “Option Agreement”).
The Option Agreement provides Total with an option to acquire a 25% Working Interest in the Orinduik Block from Eco Guyana (the “Option”). Eco Guyana currently holds a 40% Working Interest in Orinduik, and Tullow, the Operator, holds the remaining 60%. The Orinduik Block directly offsets a line of discovery wells recently drilled by Exxon in its Stabroek Block in the Guyana-Suriname Basin, with Exxon estimating between 2.25 and 2.75 billion barrels of recoverable oil.
Pursuant to the Option Agreement, Total will make an immediate payment of US$1,000,000 for the Option (the “Option Fee”), at its sole discretion, to Farm-in to the Orinduik Block for an additional payment in cash of US$12,500,000 to earn the 25% Working Interest. The exercise of the Option must be made within 120 days of completion of processing of the 3D seismic. The survey acquisition was completed on September 5th 2017 (“The Seismic Data Report”) and processing is expected to take 2-3 months. The Option Fee is repayable in the unlikely event that the Seismic Data Report is not provided to Total by 1 June 2019.
Following exercise by Total of the Option and once the transaction is completed and has received all regulatory approvals, including Government of Guyana approval, the Block Working Interests will be as follows:
Tullow – 60% (Operator)
Total – 25%
Eco Guyana – 15%
In the event that the Option is exercised, each party will pay its pro-rata working interest from that date forward.
With exploratory wells offshore Guyana expected to cost circa US$35 Million, Eco's participating interest is anticipated to be approximately US$5.25 Million per well. It is therefore projected that this transaction, if fully executed, will thus provide adequate funding to meet Eco’s share of the costs to drill at least two wells on the Orinduik Block as well as recover the costs of the expanded 3D seismic survey.
Gil Holzman, President and CEO of Eco Atlantic, stated: “We are extremely happy to complete this agreement with Total SA, one of the world's largest oil companies. 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.
“In the event that the option is exercised by Total, 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."