Eco Atlantic Oil & Gas (LSE:ECO) dipped 2.8pc to 42.3p in midday trading today after announcing that one of its partners on the Cooper block in Namibia has decided not to commit to drilling. Tullow Namibia has said it is unable to either enter into a second renewal period on the offshore licence or make a financial commitment to drilling on the block.
Eco said it will now receive a ‘significant penalty’ from Tullow because it has failed to drill one exploration well at Cooper, as required under a 2014 agreement. Tullow will also transfer its 25pc working interest in the block to Eco, taking the latter’s total stake to 57.5pc. Meanwhile, Azinam continues to hold a 32.5pc position while Namcor owns 10pc.
According to Eco, Tullow’s decision comes after its own proposed farm-in partner, ONGC, withdrew from its agreement on the block. The change forced Tullow to reprioritise its exploration budget.
With three and a half years left on Cooper, Eco said it has already begun discussion with new potential farm-in partners to jointly drill the licence’s 882MMbbls Osprey prospect. It added that Azinamhas also indication that it would like to proceed with further exploration and drilling. Colin Kinley, chief operating officer of Eco, said:
‘We are discussing the Cooper Block with other potential industry partners, as there are many parties currently seeking additional opportunities in the Walvis Basin as Exxon, Total, and the other majors are now moving into the area as exploration matures. Indeed, although unfortunate for Tullow, the company’s recentCormorant dry hole further proved the existence of a working source rock.
‘Our increased interest in the Cooper Block, which is defined as having P50 Prospective oil of over 800 million barrels, is the opening of a new door with paid-up exploration operations and permitting in place. Eco has three and a half years to drill on Cooper, providing us with ample time to put in place a new partnership prior to drilling. We are continuously in discussions with associates and partners in the region, so prior to drilling we intend to farm down part of the 57.5% interest which we now have.’
Elsewhere in today’s update, Eco said it is in discussions with its partners in Guyana’s offshore Orinduik Block around accelerating its work programme in the area. The partners, who once again include Tullow, will also look at drilling an additional well next year. Eco added that it will make further announcements once drilling plans and target selections are confirmed.
The update comes after the partners released a maiden competent person’s report for Orinduik last month, which put the block’s prospective resources at an impressive 2.9 billion BOE across ten leads. This set in motion a highly lucrative option agreement between Eco and oil major Total, which was signed last year. For an initial price of $1m, Total purchased the right to buy a 25pc stake in Orinduik from Eco for $12.5m within 120 days of receiving a complete set of 3D seismic data.
On today’s Guyana update, Eco’s chief executive Gil Holzman said: ‘The opportunity the companies share on the Orinduik Block in Guyana is outstanding, with much lower near-term risk, following the amazing success of ExxonMobil on the adjacent Stabroek block and our own3D data interpretation. We expect 2019 to be a significant and defining year for Eco.’