Ambitious explorer Eco Atlantic Oil & Gas has struck a $52 million deal to acquire a junior company that will give it a key stake in ExxonMobil's Canje block offshore Guyana.
Canje has a decent exploration address, being next door to the US supermajor's incredibly prolific Stabroek block where more than 10 billion barrels of oil have been found.
However, this adjacent acreage is proving to be a difficult nut to crack when it comes to drilling successes, with three unsuccessful probes so far failing to find commercial volumes of oil.
Nevertheless, London and Toronto-listed Eco clearly sees potential which is why it has struck a deal to buy JHI Associates — which is already partly owns — which holds a 17.5% interest in Canje.
The deal will see Eco issue 127 million new common shares to JHI’s shareholders.
This will result in JHI shareholders holding about 34% of Eco stock and the right to appoint two non-executive directors to the company's eight-member board.
The acquisition is expected to close next quarter subject to the signing of an ‘arrangement agreement’, the satisfactory completion of due diligence by Eco, plus other approvals.
The deal gives Eco a 90-day exclusivity period and terminates, or may be terminated, upon the occurrence of certain events.
Headquartered in Toronto and incorporated in Ontario, JHI is a privately-owned and was founded in 2011.
Its executive team includes former Kosmos Energy chief executive Brian Maxted, as well as Richard Boyce, Hunt Oil's former chief geophysicist.
Other key JHI personnel include Bill Hayes, who was general counsel at Kosmos,
On closing of the acquisition, JHI will have a minimum cash balance of US$15 million.
Both ExxonMobil, the operator, and TotalEnergies, have 35% stakes in Canje, with JHI on 17.5% and another little-known junior Mid-Atlantic Oil & Gas holding 12.5%.
Canje covers 4800 square kilometres and lies between 180 nd 300 kilometres off the coast in water depths ranging between 1700 and 3000 metres.
According to Eco, the block “captures the lower slope and base of slope play fairways, channels and fans outboard of… Stabroek”.
Based on 3D seismic data, said the buyer, the acreage "holds over three dozen prospects in four proven plays in Lower Tertiary and Upper Cretaceous confined channels, Lower Cretaceous carbonate structures," stressing that the most recent probe (Sapote-1) offers the opportunity of deeper horizons.
Commenting on the deal, JHI founder and chief executive John Cullen said: “This transaction provides JHI’s shareholders access to Eco’s exciting portfolio of exploration opportunities in the emerging oil basins of Namibia and South Africa, and in Guyana with their Orinduik block, while maintaining their exposure to the Canje Block, where we have been working steadily with our partners to identify the next prospect to drill.
“JHI’s team has come to work well with Eco’s team since they became shareholders last year, and we know that they will continue to be good stewards of the Canje block as they add it into their impressive and expanding exploration portfolio.”
Gil Holzman, co-founder and chief executive of Eco, said: “Being a shareholder of JHI since last year has given us a deep understanding of the Canje block and its prospectivity."
It has also given us the opportunity to get to know the great management team at JHI and their technical and business achievements to date. Because of these facts, we believe that there is considerable strategic rationale in acquiring JHI."
He said Eco’s ambition is to become the 'go-to' small-capital exploration vehicle for investors "seeking exposure to high-impact drilling programmes in three of the world’s most exciting hydrocarbon provinces in Guyana, Namibia and South Africa."
Holzman added that the enlarged group will benefit from JHI’s current cash position, adding US$15million to Eco’s balance sheet and strengthening its liquidity position.
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