Oil giant ExxonMobil (NYSE:XOM) has announced a seventh major oil discovery in offshore Guyana, further boosting the prospects of its AIM-listed neighbour Eco Atlantic Oil & Gas (LSE:ECO). Exxon’s discovery is its seventh in the area and the closest to Guyana’s Orinduik Block, where Eco currently holds a 40pc interest alongside Tullow Oil (LSE:TLW) and is planning to drill up to four exploration wells.
Orunduik is directly up dip and adjacent to the Straboek Block, where all of Exxon’s discoveries have been made. Exxon’s latest discovery, called Pacora-1, encountered approximately 65ft of high-quality, oil-bearing sandstone reservoir seven kilometres west of it Payara 1 discovery. The major oil player has confirmed that a second drill rig is currently being mobilised for production operations and further exploration on the block.
Today’s news follows Exxon’s discovery of the Liza 1 and Liza 2 fields at Straboek, which are estimated to contain as much as 2.5bn barrels of oil equivalent and were covered by the largest 3D seismic surveys in Exxon’s history. Last March, Exxon discovered the Snoek oil prospect at Guyana, an 82ft long high quality, oil-bearing sandstone reservoir that has estimated reserves of more than 3.2bn barrels. Snoek is located just five miles southeast of the Liza discovery and is once again in very close proximity to Orinduik.
Eco was quick to point out the positive implications that today’s news has on its own assets.
Chief executive Gil Holzmann said: ‘With each well, Exxon is further defining the overall scale of this giant field. Critically these discovery wells sit down dip from the Eco / Tullow block.’
‘These thick sand pathways are defining a migration and a charge of this high-quality sand with hydrocarbons. Our technical team is working carefully and conservatively to define the resources within Orinduik.’
‘With experts from Total, Tullow, Gustavson, Eco and Kinley all interpreting the processed data as it becomes available, we are building confidence in the world-class potential of this block.’
‘This Pacora discovery is very close to our border and has added a new and significantly important dimension to our prospectivity.’
Eco’s shares were unmoved by the news today but, as we pointed out last month, it is still the only AIM-listed firm to operate in the high potential Suriname Guyana basin, where Orinduik and Straboek are based. As such, it is hard to see how discoveries like the one announced by Exxon today can do anything other than strengthen Eco’s already decent prospects in the area.
As Holzmann put it to us: ‘These discoveries do not just emphasise the fact that the Suriname Guyana basin is active, they also show that we are in the right postcode in this neighbourhood. We are seeing the same trends, same structures and the same kind of a play on our block as ExxonMobil is seeing. After all, we are just 6km away from a major oil discovery.’
Aside from Orinduik’s prospects, Eco also holds interests in four offshore licences totalling an area of around 25,000km2 in an oil basin in offshore Namibia, with one licence estimated to contain as many as 850m barrels. What’s more, in November last year, major Canadian oil player Africa Oil Corp made a surprise £8.5m strategic investment into the firm to help it expand even further.
Eco now has a strong £9.3m cash balance, which would soon increase by £8.9m if an existing option with Total is exercised, meaning it is fully funded for existing and future work and exploration. Today’s news, a strong oil market, and Eco’s overall prospects mean its 35.6p share price could look very cheap.
Author: Daniel Flynn
The author does not hold positions in any of the stocks mentioned above