Shares in Eco Atlantic Oil & Gas (LSE:ECO) more than doubled to 137p on Monday morning after the business announced a ‘revolutionary’ discovery at its licence off the coast of Guyana.
The firm, which was trading at 68p on Friday, said the Jethro-1 exploration well drilled on its part-held licence on the Orinduik block hit 55m of net high-quality oil pay in ‘excellent’ lower tertiary sandstone reservoirs. According to the company, these findings support recoverable oil resources. As such, the well has now been cased ahead of further evaluation to determine the appropriate appraisal activity.
Orinduik is adjacent and updip to ExxonMobil and Hess Corporation’s Stabroek Block, on which twelve discoveries have been announced, and over 5.5bn boe recoverable resources are estimated. Eco holds a 15pc stake in the licence alongside Tullow Oil, which is the operator and majority owner of the asset with a 60pc stake.
The remainder of the licence is owned by Total, which exercised an option to farm-in to part of Eco’s stake earlier this year. The major’s move followed the release of a maiden competent person’s report for Orinduik, which put the block’s prospective resources at an impressive 2.9 billion BOE across ten leads.
For an initial $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. 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.
In a separate update on Monday, Tullow said that the discovery at Jethro-1 ‘significantly de-risks’ other Tertiary age prospects within the offshore licence area. Among these is the upper tertiary Joe prospect, where drilling will begin later this month once work has finished at Jethro-1. Joe is a 150MMboe Upper Tertiary target with a 43.2pc chance of success, as estimated in a recently published report over Orinduik by Gustavson Associates.
Meanwhile, a non-operated well called Carapa 1 will be drilled later this year on the adjacent Kanuku licence to test the Cretaceous oil play – opening up the possibility for further de-risking.
Eco’s chief executive and co-founder Gil Holzmann called the discovery at Jethro-1 a ‘revolutionary moment’ for the business, adding:
‘This is a transformational event for the Company, and we now need to strategically plan for an even brighter future. With multiple targets to consider, and Joe as the next prospect to be drilled, we will now pursue our evaluation of the timing for wells to develop the Jethro field and to expediently bring it on production. We are funded for at least six additional wells.’
Likewise, fellow co-founder and COO Colin Kinley said the discovery confirms the continuance of the petroleum system onto Orinduik, up-dip from Exxon’s large discoveries at Stabroek.
‘The well has resulted in a mitigation of risk of the presence of quality reservoir sands, seal and trap parameters. We have multiple drilling targets on the block with similar geophysical characteristics and we are moving the Stena Forth drill ship immediately to its next target, Joe-1,’ he added. ‘The Joe-1 location is just a short move to a shallower target, and is expected to spud mid-August.’
ValueTheMarkets tipped Eco as a buying opportunity back in April, when the stock was trading at 83p in the wake of a $17m placing. We suggested that, once the dust settled from the placing, a trade levels at the time could prove fruitful as anticipation began to build into the company’s first drill.