Shares in Eco Atlantic dropped 4.9pc to 73.25p on Wednesday morning despite the business highlighting its ‘robust financial position’.
In its update for the final three and nine months of last year, the company revealed a cash and cash equivalents balance of CAD$25.7m (c.£14.7m). Meanwhile, its total assets came in at CAD$28.1m (c.£16.1m), and total liabilities sat at CAD$0.8m (c.£0.5m), translating into total equity of CAD$27.3m (c.£15.6m).
The firm put these strong figures down principally to its $12.5m farm-in with oil major Total at its Orinduik Block in Guyana last October. The deal saw Eco transfer 25pc of its stake in the asset to Total, leaving it with 15pc. Tullow’s decision followed the release of a maiden competent person’s report that put the block’s prospective resources at 2.9 billion barrels of oil across ten leads. Three of these have a 22.4pc estimated probability of success.
Gil Holzmann, president and chief executive officer Gil Holzmann said: ‘The completion of Total’s farm-in to our block and the receipt of $12.5 million, together with our existing cash resources, means that we are fully funded for at least two wells on our high impact 2019 drilling program in Guyana. With our strong balance sheet we remain in a robust financial position.’
Alongside Total and Tullow Oil- Orinduik’s 60pc owner and operator- Eco is now targeting a 250MMbbls oil target called Jethro-Lobe at the block. The partners hired a rig from Stena Carron Drilling to drill the prospect last week. The contract secures the rig for transport at the end of May, targeting an early June 2019 spud date.
The agreement also defines a window for a second well on the Orinduik Block following the drilling of Jethro-Lobe. In Wednesday’s update, Eco said the partners are currently reviewing plans and prospects for a second well and expect to formalise these over the coming weeks. The anticipated cost of a second well is expected to be less than the first, as the values for the mobilisation, demobilisation, well heads and casings are already included in the budget for the first well.
Elsewhere on Wednesday, Eco said the farm-in helped it to deliver a profit of CAD$14.4m (c.£8.2m) over the last three months of 2018. Meanwhile, it made a profit of CAD£11.3m (c.£6.5m) in the final nine months of the year.
The period covered by Wednesday’s result included a setback for ECO, with 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 around three years left on the Cooper licence, Eco has begun discussions with new potential farm-in partners to drill the area’s 882MMbbls Osprey prospect jointly. It added that Azinam has also indicated that it would like to proceed with further exploration and drilling.
Holzmann also took the opportunity on Wednesday to highlight that Eco has ranked second in the Energy Sector on the 2019 TSX Venture 50, up from fifth in 2018.
‘This marks the second consecutive year that we have been included in the TSX Venture 50™, an annual ranking of the top-performing companies on the TSX Venture Exchange,’ he added. ‘We look forward to updating the market on the selection of the second target well to be drilled on the Orinduik Block, immediately after the Jethro-Lobe well, and we are very excited by this opportunity to hopefully discover very significant oil resources in the coming months.’