Eco Oil & Gas Ltd is pleased to announce that it has signed a definitive Farm-out Agreement with Azimuth Ltd. (“Azimuth”) of Hamilton, Bermuda, an exploration and production company backed by majority-owner Seacrest Capital Ltd. and Petroleum Geo-Services ASA (“PGS”) (Letter of Intent announced on December 22, 2011).
Pursuant to the agreement, Azimuth will earn a 20% working interest in each of Eco Atlantic’s offshore Namibia licenses, namely the “Cooper License” (Block 2012A), the “Sharon License” (Blocks 2213A & 2213B) and the “Guy License” (Blocks 2111B & 2211A) (jointly, the “Licenses”) in return for funding 40% of the cost of 3D seismic surveys covering 2,500 square kilometers across all three Licenses, the acquisition of which is expected to cost in excess of US$25 million. The assignment of a 20% working interest in the Licenses to Azimuth is subject to the approval of Namibia’s Ministry of Mines and Energy.
Eco Atlantic currently holds a 90% working interest in the Licenses through its wholly-owned subsidiary Eco Oil and Gas Namibia (PTY) Ltd. (“Eco Namibia") and NAMCOR, the Namibian national oil and Gas Company, holds a 10% working interest. As a result of this transaction, Eco Namibia’s interest will be 70%, Azimuth will earn a 20% interest, and NAMCOR will retain its 10% carried interest. Eco Atlantic, through the project management group of Kinley Exploration and Azimuth will be responsible for designing, sourcing and operating all aspects of the 3D seismic program.
Gil Holzman, President and Chief Executive Officer of Eco Atlantic commented, “Eco Atlantic is excited to have executed the Farm-out Agreement thereby securing the relationship with Azimuth as a license and technical partner. This partnership will enhance the technical ability brought to analyze the Licenses, thereby reducing the execution risk and strengthening the Company's technical ability to perform its offshore Namibia 3D Geophysical program. The cost of the 3D program is approximately US $25million on all three offshore blocks, and the Company’s current balance sheet combined with Azimuth's contribution covers the majority of the cost associated with our program.”
Aaron D’Este, Managing Director of Azimuth Management Ltd., commented, “We are delighted to have executed the Farm-out Agreement with Eco Atlantic. Namibia is a very promising petroleum province and we have evaluated numerous farm-in opportunities across the country. Eco Atlantic’s portfolio of offshore acreage is among the most exciting, spanning three distinct environments, each with excellent prospectivity. Azimuth has access to the world’s largest library of 3D seismic and to a team of 85 subsurface experts with extensive experience in West Africa. Our team assessed Eco’s assets independently and we support the volumetrics and conclusions in Gustavson’s reports. The quality and diversity of the prospects on Eco Atlantic’s offshore acreage is excellent. We look forward to working closely with Eco Atlantic to define and execute the technical program required to produce robust drilling targets as quickly and safely as possible.”
Update on Onshore Licenses
On December 8, 2011, the Company announced that it had entered into a Farm-out Agreement (the “FOA”) with West Bay Investments, Ltd. (“West Bay”) in which West Bay farmed into both of the Company’s CBM onshore license blocks (Blocks 2013B, 2014B, 2114 and 2418 collectively the “Onshore Licenses”). Eco Atlantic announces that it has terminated the FOA with West Bay due to West Bay’s material breach of the terms and conditions set out therein. The failure of West Bay to satisfy the terms and conditions of the FOA renders the 50% working interest it was to have to in the onshore licenses null and void. Subsequent to the termination of the FOA, the Company’s interest in the Onshore Licenses reverts to 90% with NAMCOR maintaining a 10% interest.
The Company is pleased to announce that it has successfully completed and submitted its desk top studies and the Environmental Assessment Surveys on both its Onshore Licenses. Based on the desk top studies, the Company intends to identify drilling targets on its blocks. For that purpose, the Company has been granted an extension to complete the drilling of at least 1 well on its onshore Licenses, to a time no later than the expiry of the first term, being March 2015.