Eco (Atlantic) Oil & Gas (EOG.V) signed a definitive agreement to farm down a 37.5% working interest in Block 1 CBK offshore South Africa (Block 1 CBK) to Navitas Petroleum LP, through a unit, it said Wednesday.
The agreement is conditional on receipt of customary regulatory approvals, from the Petroleum Agency of South Africa and the TSX Venture Exchange, and receipt of US$4 million cash payment from Navitas to Eco. Following a review of geological data, Navitas has elected to exercise the Block 1 CBK option through the execution of a definitive farmout agreement on May 19, said the company.
Navitas will become the operator of Block 1 CBK with 37.5% working interest upon completion of the deal and Eco will retain a remaining working interest of 37.5%. Eco will be carried by Navitas for the work programme, the value of the carry being capped at US$7.5 million net to Eco.
The amounts carried by Navitas will be repaid via Eco's share of proceeds from future production on the Block, it added.
"Building on our recent farm down to BP in Namibia, we have now further deepened our strategic partnership with Navitas, working not only in South Africa but also in highly prospective acreage offshore the Falkland Islands in PL001, which Eco will gain further exposure to upon the upcoming completion of our acquisition of JHI Associates Inc.," said Eco Chief Executive Gil Holzman. "Additionally, Navitas also holds options to acquire 80% of Eco's interests in the Guyana Orinduik Block where we are progressing advanced discussions with the Government over the terms of the next exploration and appraisal stages, offering scope for our partnership to extend further."
Shares of the company closed unchanged at $1.1 on Tuesday on the TSX Venture Exchange.