Eco Atlantic Oil & Gas (LSE:ECO) rose 0.9pc to 45.4p this morning after receiving government approval for its $12.5m farm-in with oil major Total on the Orinduik Block in Guyana. The country’s president David Granger approved the transfer of a 25pc working interest in the licence from Eco to Total.
Today’s news comes after Tullow exercised a $1m option to farm-in to Orinduik last month, following the release of a maiden competent person’s report for the area. The report put the block’s prospective resources at 2.9 billion barrels of oil across ten leads, three of which have a 22.4pc estimated probability of success.
Following the farm-in, Eco will retain a 15pc stake in Orinduik, while operator Tullow Oil will hold on to its 60pc position. The Orinduik partners have committed to drilling at least well at the site next year. Colin Kinley, Chief Operating Officer at Eco, said:
‘We are pleased to have received approval from President Granger so promptly after submitting all of the requested transfer documents. The new team in the Ministry were thorough and effective in this swift and timely approval process and this allows the Orinduik partners to next focus on our 2019 drilling program.’
As a result of the farm-in, Eco has previously said it will be fully funded for the cost of two-to-three wells at the block without raising additional funds. Chief executive Gil Holzman added:
‘We are very glad to be able to move ahead so effectively and swiftly in Guyana, significantly ahead of our committed licence schedule. Following the joint signature of the petroleum agreement with Tullow, and now with Total’s option exercise, our belief in the prospectivity of the block and our strategy to partner with world-class oil companies is only strengthened.’
Eco suffered a setback earlier this month when one of its partners on the Cooper block in Namibia announced that it had decided not to commit to drilling. Tullow Namibia 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.
Tullow will 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 came 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 a discussion with new potential farm-in partners to jointly drill the licence’s 882MMbbls Osprey prospect. It added that Azinam has also indicated that it would like to proceed with further exploration and drilling.